December, 2012

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How to Negotiate a Higher Salary Even Without Work Experience

Money Smart | By Ryan Ong -Wed, 26 Dec 2012

There’s no need for fancy introductions here. I’ll come straight to the point: You can get paid more, even without work experience. That’s what the tips in this article are for. Here, dear MoneySmart reader, I will man you up, give you the confidence to demand your worth, and win you that dream job. Experience irrelevant. In fact, some blind kid read this last week, and now he’s the highest paid sniper in the US Army. I can’t possibly make that up, so read on:

 

Job Interview

Work experience? Well, school sure seemed like a lot of work…

 

Salaries are Arbitrary

Salaries come on a sliding scale. Even for an entry level job, for example, you can see something like “between $1,400 to $1,700″, or “Salary negotiable, $3,000 and up”.

Which leads me to ask: What justifies the difference of those few hundred dollars? Why do two people at an entry level job sometimes have salaries that are $500 or more apart?

Here’s an e-mail response from Marcus Chun, who has been a hiring manager for eight years:

It depends on the beliefs of the prospective employer. Some employers cherish work experience, and some don’t care too much for it.

In some jobs, for example sales, you can have worked in sales for 10 years, but still be a lousier salesman than a talented youngster. If the hirer is aware of this, he will be looking for your charm and intelligence during the interview, not so much your work history.”

And this opens the avenue for pay negotiations?

Yes. There are ways to impress an interviewer that could put a candidate on the high-end of the pay scale. This can happen regardless of your current work experience.”

Some methods Marcus shared with me are:

  • Posit Immediate Solutions
  • Be a Trainee
  • Merit By Association
  • Demonstrate That You Cover Your Costs

 

1. Posit Immediate Solutions

Rube Goldberg device

And then the ball hits the plate, which causes the spoon to lift and…are you listening?

 

Most newbies, when asked to present their closest thing to experience, will pull out awards they won in school. Or extra credit activities.

Now look, I’m glad you took a week to build mud huts in poverty stricken Koana or wherever. It moves me, it really does. But the hirer isn’t going to pay you more for being a great humanitarian or a boy scout. If you want higher pay, replace those abstract credentials with immediate, applicable solutions for the employer.

Find out what problems the company is facing. Ask what they need,” Marcus suggests, “Then draw up a solution for them. If need be, say ‘let me get draw up a more complete solution for this, and I’ll e-mail to you by tomorrow morning.’

If you can impress them that way, you can ask for higher pay. They might choose to overlook the experience issue, as it’s obvious you can do the job well.”

 

2. Be a Trainee

Police man with V sign

Don’t worry, I’m motivated. I’m on half pay till I solve my first actual crime.

 

“Sometimes you just have to start from the bottom,” Marcus says, “but you can determine a set point for a pay bump. For example, you can agree to be a trainee for a lower income initially. But the agreement is that, within three to six months, if your performance is acceptable, the company will take you on at a set pay. And that set pay is on the higher end.”

Marcus mentions that most SMEs (Small to Medium Enterprises) have no problems bumping a trainee’s eventual pay to the higher-end of the scale. This is because they’d rather someone they’ve gotten to know, and it lessens their commitment. After all, if they decide not to hire you at the planned pay range, they can drop you before the time comes.

But don’t bother trying this with big companies,” Marcus says, “If a big company wants a trainee, they will get a trainee. They don’t need you to offer.”

Marcus also warns against less scrupulous companies, which might take advantage of you for cheap labour. “At most six months, that’s it,” he says.

 

3. Merit By Association

Google office

Check out my paper bag. Am I getting that head developer job or what?

 

There’s a joke that if you worked in Google you can always get higher pay,” Marcus says, “Even if you worked there for less than a year, and you managed their broom closet.

Of course that’s just a joke. But if you’ve interned or worked in a prestigious company, however briefly, you have their brand name behind you.

Mention that, in your time there, some of that company’s culture and methods rubbed off on you. Say how you were impressed by this or that specific process, and go into details. This might convince the hirer that you can bring in something of value.”

Of course, not everyone has the advantage of an internship in a big name company. Which is really why you should have done that in University, instead of joining 25 Unreal tournaments.

For alternative means of building the right associations, follow us on Facebook. We’ll be giving you a primer on that soon.

 

4. Demonstrate That You Cover Your Costs

Calculator

Actually, we’re calculating the number of YEARS it would take for you to pay for yourself…

 

“Not enough people bring spreadsheets to a job interview,” Marcus says, “That’s really a pity, because it’s a good way to convince me, or whoever your hirer is, to pay more.”

The point of the spreadsheet is to show how much revenue you’ll bring. This is then contrasted against your wages, to show that you’ll more than cover your salary.

So say you’re asking for $3,500, which is actually $500 beyond the company’s budget. But if your previous sales projections show you bring in $6,000 a month, that extra $500 more than compensates for your higher pay.

The best part is, you can do this even without a previous sales record.

If you have the confidence to face me, and tell me you can generate twice your income,” Marcus says, “You’re setting a high standard for yourself.

I’d be skeptical, sure. And believe me, it will come up at a review. But between writing that promise down on a spreadsheet, and just saying ‘Oh I am a very hard worker’, which do you think is more convincing? If you want to be paid more, this is one more step to justify it.”

Are You Mature Enough To Buy A Home?

By Mark P. Cussen | Investopedia – Fri, 30Nov2012

If you are contemplating buying your first home, you must carefully evaluate your financial situation and understand what you would be getting into. Money is not the only operative factor in this equation either; there is much more to homeownership than mortgage payments, property taxes and the cost of furnishings. Homeownership is a life decision, and it will affect almost every aspect of your life in one way or another.

Permanency
Buying and moving into a home is a vastly different proposition than moving into a rental house or apartment. If you discover that you don’t like your surroundings as a renter, then you will only have a lease agreement to contend with if you decide to move. Changing houses is obviously a much different proposition, as this requires you to go through the entire home sale and purchase process all over again. Most financial experts will also tell you that you will have to stay in your house for anywhere from two to six years in order to make up for all of the initial closing costs and other expenses that inevitably arise when you buy a home.

Maintenance
One of the biggest disadvantages of homeownership is that there is no landlord to call when something needs to be fixed. Keeping your home structurally and mechanically sound and maintaining an attractive property can cost you thousands of dollars above and beyond your normal upkeep expenses and also require a major commitment of time and effort. Some of the major maintenance projects that you may face include:

Repainting Your House
Your home will likely need a new coat of paint at some point, either inside or out. If you have this done professionally, you can usually expect to pay at least two thousand dollars, depending upon the size of your house and the amount of work that it will take to do the job. Doing this job yourself will be a major undertaking.

Replacing Your Roof
This is one project that you will not likely be able to do yourself. The average cost of a roof can easily range around $10,000 to $15,000, and the price depends upon the type of roof and type of shingles that are used.

Foundation Problems
Foundational erosion and collapse is every homeowner’s worst nightmare, and fixing this problem isn’t going to be cheap. Mud jacking can cost thousands of dollars if the problem is severe.

  • Plumbing and electrical repairs

 

  • Furnace and air conditioner repairs and replacements

 

  • Treatments for termites and other pests

Relationship Security
Your pocketbook is not the only thing that needs to be healthy before you buy a home. If you are married or in a domestic partnership, you need to evaluate the stability of your relationship before you commit to purchasing a home together. When two people who live in an apartment together divorce or break up, one of them simply moves out. When two people are listed on the title deed for a residence, getting one of them removed is much more complicated. When this happens, the person who stays must shoulder the entire cost of the home by him or herself (albeit with the help of child support or alimony in many cases). If you are having problems in your marriage or other relationship, then you need to seriously consider where the two of you will be in five or ten years. If you think that there’s a good chance that you will split up, then homeownership should be approached with caution.

Personal Health
If you have physical or mental limitations that may prevent you from being able to perform normal maintenance tasks on your home, then you need to have a clear idea of how you will accomplish these things before you sign on the dotted line. If your health is in decline, then buying a fixer-upper is probably not a good idea unless you can clearly afford to pay for all of the repairs and maintenance.

The Bottom Line
Buying a home requires a certain level of emotional and mental maturity. The ability to think ahead and foresee possible problems down the road is key before making the commitment, especially for first-home buyers.

When Life Insurance Isn’t Worth It

By Greg McFarlane | Investopedia – Mon, 19Mar2012

The principle behind life insurance is simple, in theory. It’s also morbid, at least compared to other financial services. You pay small amounts at monthly intervals, and should you die, a beneficiary of your choice gets a sum of money approximating what you would have earned had you stayed alive.

That’s the stark truth right there, which a lot of life insurance customers fail to comprehend: the service is supposed to be nothing more than a replacement plan. The idea is that should your family suffer a crisis that transcends finances, at least their finances won’t be impacted too negatively. If you die, your spouse and kids won’t have to take on multiple jobs, beg for alms nor lose the house and car.

Hedging Your Bets
It’s important to remember that life insurance isn’t really “insurance” in the dictionary sense. When you buy life insurance, you’re not “insuring” anything. No matter how much money you give them, Ameriprise can’t keep you from dying. No, life insurance is more about hedging your bets than anything else. While you’d prefer to live, if fate has an alternate plan then you can spend money now to help your family avoid multiple catastrophes later.

But as a result of it being called insurance, there’s an overly conservative type of person who believes that if “coverage” of some kind is good, then more coverage must be better. Buying life insurance thus becomes a test of one’s capacity as a responsible adult and breadwinner. What kind of person doesn’t want to protect their loved ones? To that end, some people insure anything that moves – even (especially) their children.

Sounds great in principle, until you remember that kids don’t earn any money. Or at least not any money that’d be difficult to replace. Which reinforces the morbidity of life insurance: losing a child is such a colossal tragedy that if there’s any eventuality that needs to be prepared for, it’s that. Some parents argue that they couldn’t function after the death of a child, and thus a policy on said child helps them sleep at night. But if you claim you’re not going to be able to function anyway, why not keep the money you’d have otherwise spent on life insurance for someone who barely earns any income?

The same goes for older relatives. Both the healthy and infirm have a decreasing amount of time remaining, and the less healthy an older relative is, the smaller the death benefit you’ll receive for a policy of a similar premium size. Add retirees’ limited income (regardless of how substantial their net worth may be), and much of the time, senior insurance seems like an unwise move.

How Much You’ll Get
Stay alive, and a standard term life insurance plan has zero return. Start a 20-year term policy today, and if you don’t die by 2032, you’ll have received nothing. That’s not a bug of life insurance design, but a feature. After all, throughout the policy’s term you’re getting whatever peace of mind comes with knowing that your death won’t impoverish your family. Most policyholders understand this, and appreciate that life insurance isn’t intended to be an “investment” in the conventional sense.

Other insurance customers are uncomfortable at the idea of sending a long series of fixed payments to a financial services firm with the certainty that they’ll never see any potential for profit. Rather than accept life insurance for what it is – again, a replacement plan – these customers want some sort of return. Thus the industry devised whole life insurance and universal life insurance, two variants on term life insurance that each offer a cash value beyond the standard life insurance death benefit. You pay a little more each month than you would with a term policy (we’d call the little more a “premium” but it’d just confuse things), and the difference builds and can be redeemed at your convenience.

Purchasing policies more complex that a term life insurance policy could make economic sense if the cash value increases quickly enough. But investing and insuring are two different and usually incongruent goals. There are surer and more direct ways to invest, beyond enhancing one’s insurance policy with a form of annuity. A combination protection plan/investment plan is like a combination toothbrush/nail file, assuming such a thing exists. The hybrid probably isn’t going to perform either task as well as the disparate products it aims to replace.

The Bottom Line
This isn’t a jeremiad against life insurance in principle. If you’ve got sufficient income, a risky enough likelihood of staying alive (which a prudent insurer will take note of and charge a correspondingly higher premium for), and enough dependents with little earning power among them, a term policy isn’t necessarily a poor way to spend your money. Just remember that investing is deferring spending in hopes of a financial gain. Insuring is spending now in hopes of avoiding financial loss. In that respect, the two activities are almost opposites. An insurance policy that masquerades as an investment is rarely going to be your best option for accomplishing the conflicting goals of maximizing return while minimizing risk.

How to be wise with your money

Source: MensXP.com – Thu, Nov 22, 2012 8:30 PM PHT

We don’t want to be materialistic but we have to face the fact that we need money.

Someone rightly said that those who say money can’t buy you happiness, simply don’t know where to go shopping. It pays immensely to be wise about money. But are we? Read on, and moneywise, be wise!

1) Save, Save, Save

Cultivate this golden habit if you haven’t already. This habit is worth in gold and nothing but your savings would see you through your rough patch. Whatever be your income, start saving without any further delay.

2) Watch Your Spending

It indeed makes a hell lot of sense to listen to Warren E. Buffet, the second richest man in America, isn’t it? He very rightly said that keep a close watch on your spending. Buy things which you need and not because of peer pressure.

3) Borrow Only What You Can Repay

Living on credit cards and loans is too tempting an offer. However, both come with an element of risk. Credit cards and loans don’t make you rich, so weigh your pros and cons to save yourself from falling in the trap. So, look before you leap.

4) Don’t Rely On One Income

Make this your guiding philosophy. With uncertainty, job cuts and recession all around, it is foolish to depend on only one source of income. Invest and create a second/third source of income. That would do a whole world of good to you.

5) Split Bills, It’s Perfectly OK

Honestly, there is no shame in splitting bills no matter who is accompanying you. Don’t volunteer to pay all on your own since it would burn a big hole in your pocket in the long run, without you even realizing it.

6) Go For Health Policies/Insurance

No one has seen the future, right? With advancement in medical science, today even life-threatening diseases can be cured, but at a cost. It is always better to be covered by such policies. They would prove to be a boon in the case of medical exigencies.

7) Take Risk, But Calculated Risk

Life itself is risky; nobody comes out of it alive. But still it makes perfect practical sense not to test the depth of water with both feet. Better be safe, than sorry.

8) Discuss About Money With Family

Keep your family in the loop regarding your finances. That won’t lead to any unrealistic expectations on their part, thereby saving you from unnecessary hassles.

9) Think Big, Start Small

It’s all about the concept and the way you showcase it. While starting a business, think big but take small steps. Only when you are extra sure, take a giant leap forward.

10) Never, Ever Discuss Money Matters Publicly

Honesty is a rare commodity in today’s time. Money matters are best kept secret to save yourself from being duped. It’s your hard-earned money after all. Do all that it takes to multiply it and make yourself financially sound and secure.

Real-life loan stories – A must read

BDO Money Matters | By Mark B. Aragona for Yahoo! Southeast Asia -Wed, 28 Nov 2012

What does life look like when you’re borrowing money? It takes major adjustments to get what you want, but it’s often worth the risk. Below are stories of how some people made loans work for them, and not the other way around.

Housing Loan

Kristine, 34, is a newly-married teacher. Like most couples, she and her husband dreamed of owning a house. They picked out a condo unit under pre-selling, but as they were just starting out in life and couldn’t afford the usual 20% down payment, they looked for some possible solutions.

One choice, which they rejected due to their high interest rates, was to let the developer’s in-house financial company fund their down payment. Their broker showed them a second option: apply for a bank housing loan for the down payment, then follow it with another 10-year loan to cover the rest of the amortization.

Kristine and her husband agreed, gathering needed documents like the deed of sale from the broker, their cedula, proof of employment, and IDs. Because they were already long time clients of the bank, they didn’t have to submit other kinds of documents like passports. After three weeks of processing, their application was approved with an interest of 10% per annum.

Now, Kristine and her husband are paying off the 20% down payment, which will last for the next 13-15 months, then they’ll work on the other 80% over the next 10 years. “In the beginning, it was scary,” says Kristine. “I felt like I was selling my soul, because I’ve never had a loan this big before. But everything worked out fine in the end and we’re able to pay our monthly dues. It’s still quite a commitment, though, and we agreed not to have kids till we’re done with the down payment.”

Car Loan

Paul, a 33-year old physical trainer, obtained a car loan out of his necessity: his old car finally broke down after many years of service. He put up a 25% down payment on his own but needed the loan for the rest of the amount. After submitting his proof of income, bank statements, proof of residence, and his pay slips, his application was approved within three weeks: he received a four-year loan at 20% interest per annum.

“It was convenient,” he said. “There was no trouble at all once I finished submitting my files. Of course, it would’ve been really nice to have bought the car with plain cash and avoided the interest payments, but it just wasn’t possible. For me, this was the second-best alternative.”

Personal Loan

Finally, Mark, a 27-year old IT specialist, wanted to start a small food business but needed some seed capital. As it turned out, a bank was offering personal loans to the employees of his company at 15% per annum. He snapped up the chance and took on a 1-year loan of Php100,000, the monthly payment of which would be automatically debited from his paycheck.

After eight months, Mark found his business was taking off and needed more time and attention. He decided to quit his job. However, he found that doing so would mean that the balance on his loan would be due and demandable. Because the loan would completely eat up his separation pay, he decided to try and negotiate.

Mark met with the loan officer and offered to continue paying the remaining five months using checks. At first, the loan officer refused, so Mark then took it up with the manager, and even all the way to a vice-president. In the end, the bank agreed, and Mark finished the loan as scheduled without any additional burden on himself.

“My take-away is that as long as it’s within reason, the terms of loan are negotiable. You just have to keep trying and look for someone who would listen to you.”