Stop Milking Me! - Cow’s Journey To Financial Freedom

Your first reaction might be: how the hell can that be possible??!! It’s a God damned Money Market Fund!

Yep, I thought so too when I first saw my forgotten e-Trade Money Market fund declined from $580 to $460 in just 9 months! I was prepared to see some penny size interest earnings, but never thought that I’ve lost hundreds in less than a year! Who the hell sucked up all of my bloody money?

With lots of anger, I called e-Trade representative. The answer? I should have read the fine print:

Account Minimums

• $100 minimum initial deposit required
• $1,000 average monthly balance in the account or $5,000 in combined average monthly E*TRADE Bank deposits balances required to avoid a fee
• No account minimums if you have $50,000 or more in linked bank and brokerage accounts; or, if you make at least 30 or more stock or options trades per quarter

Costs and Fees View all bank fees

• $10 for each month your account minimums not met
• Account holders are allowed six free withdrawals or transfers from their account in any calendar month (ATM withdrawals excluded), with a maximum of three withdrawals by check

Matter of fact, since my Money Market fund was part of my old brokerage account, it was $40 per quarter instead of $10 a month. I still can’t find where the fine print is on my specific account. Bummer… Well, on the bright side, I forgot about this account long time ago. So whatever is in it, it’s extra cash, right?

From time to time, I still make this mistake. When I purchase a fund, I looked at it’s expense ratio (if it is a mutual fund), or interest rates (if it is a saving or money market fund), however, I do not always check for other fees. If you have a broker who is handling your money, do you ask how much your broker charges in addition to what the fund manager charges? It’s very tricky to figure out the total cost of one investment. So I learned my lesson about the fine print. You gotta read every single little thing before you sign up for it.

If only if I have read about e-Trade’s fine print, I could have closed this account last year after I sold my stocks. $120 is worth 3 months of my coffee fund! Damn it!

If I can only fund one type of retirement, it ain’t gonna be Roth. And here is why.

The difference between 401K and Roth IRA is obviously in Tax. For 401K, you pay your tax later. For Roth, you pay tax now but claim capital gain free in the future. A common rule of thumb is that we should always invest enough money in 401K to get the max of the employer matches. But what happens after that? Where should the money go after we put in 6% to get employer’s 3% match? Should we start opening a Roth account or continue piling up money into the company 401K?

I guess it all depends on the tax bracket. Say if you are in 28% bracket, and later when you retire, you might be paying much lower income tax. There is also a fact that a lot of people are overlooking: today’s dollar will earn a lot of money after 20, 30 years. So if this is the case, I almost think that saving today’s money is probably more valuable than trying to save the future money. Here is an example:

Say Bob Dole has $2000 to invest. If he puts it in a Roth IRA fund that earns him 8% a year, he ends up having $20125 in 30 years without adjusting the inflation. However, since Bob has to pay 28% tax on that $2000, he loses $560 today’s money, which translates to $5635 of future opportunity loss. So his total future net is $14314.

If Bob puts $2000 into 401K, he will get $20,125 in 30 years. If Bob’s new tax bracket is 15% after he retires, he pays $2719 in tax. So he ends up having $17406.

This example shows how powerful today’s money is if we invest it over a long period of time. So even if I were qualified for Roth IRA, I would probably still fund my 401K first before I put a dime in Roth.

Of course, if the tax law changes, then all bets are off…

Believe it or not, I have never sold anything on eBay. It just never happened.

Now, with my giant plan to set up kitchenware online store(s), I will have to test the water myself. In this past weekend, I rolled up the sleeves, set up an account with both eBay and Paypal and started selling and buying.

I am currently bidding on a rock climber’s chalk bag and selling an old PS2 video game “Devil May Cry”. It’s a shame that I have 0 transactions right now and am probably the most undesirable seller/buyer in the eBay community. So I don’t really care if I am paying too much for the bag or getting nothing for the game. I want some positive feedbacks right now so I can sell serious stuff later.

In the same time, I am studying really hard trying to find an eCommerce software or service to launch the store. Bottom line, eBay might be a channel for me to sell some stuff, but my main goal is to build my own stores online. It might be a stand-alone-store, a Yahoo store, an eBay store, or a combination of all of the above.

It’s a big plan, but I am starting small and taking baby steps. So first, let’s see how my bid goes… You can search member id “acmekwglobal” to peek at my sales on eBay Community site.

Update:
I finally got through the customer service of my web hosting company and changed the domain name. Now the Cow Site has it’s own domain: www.freethecow.com. Please bookmark. Thanks!

I spent some time last night to create the RSS feeds with Feedburner and FeedBlitz and set up the RSS subscription feature for this site. You can either subscribe via e-mail or any of the news feeders you choose. The links are all located on the right side bar.

I am also battling with my hosting company to point my newly registered domain www.freethecow.com to here so that the Cow Project can be totally separated from Yuna’s Village. It’s a pity that I have to pull down my personal site. But hopefully I will be able to do some cool stuff here if I can figure out the ins and outs of PHP mumbo jumbo. After all, I was a programmer for most of my life and no programming language should scare me… I hope… hehehe…

In addition, I am experimenting with different Ads to try to bring in some supplemental income, so every click is appreciated if you enjoy reading here. Although I don’t know how far I can go with online advertising, it’s something worth trying and it has been kind of fun to play with different methods in the past 2 weeks. I will run a post at the end of each month to summarize my earnings as part of my monthly performance report. So stay tuned…

Instead of worshiping American Idol (Ok, I admit that I watched last night ’s episode), I spent most of my spare time these days to research the best method to launch an online store. Like I mentioned earlier, my family owns a brick and motor kitchenware store called ACME Kitchenware Plus. Because of my parent’s limited amount of energy, they coded a simple HTML website and it sucks! They are not selling anything on the site after paying a whooping $7.95 monthly hosting fee. I want to turn it around and start selling the stuff online.

After nights of reading and experimenting, I have concluded three major ways to sell via online store:

• Use a pre-packaged eCommerce service such as Yahoo! for small business, or Monster Commerce.
• Get a cheap hosting plan, download open source Merchant software and do it yourself
• Sell via eBay or eBay store

eCommerce Service
If you dig deeper, these services are the basic Web Hosting with the eCommerce software add-ons. You can easily manage your product catalog, cross reference the items, provide shopping cart and checkout features, or even integrate with major shipping carriers such as UPS. It’s easy to set up, however, depends on the plan, you may not get much flexibility as what you want to do on the site. And they charge you a monthly fee, which is a whole lot more expensive than a plain web hosting plan. The major competitors are:

• Yahoo! for Small Business – Basic plan starts at $39.99.
• Monster Commerce – Basic plan starts at $99.99
• Volusion – Basic plan starts at $57 with a limit of 100 products.

Open Source eCommerce
osCommerce software is the one I looked at. The source is PHP based and it is completely open for you to modify. It’s just like any other eCommerce software that has all the selling features. I actually installed one here as a playground, so feel free the check it out. The downside is that you gotta be a real techie person to crack those PHP code and make it work for you. Fortunately, the osCommerce technical manual provides quite a bit of information as how to modify and where the files are. With those instructions, a programmer like myself can dig around the code and eventually figure out the ins and outs of the software architecture and make any mods I need to.

The Good Old eBay
Selling through Auction has been around for a while, even the eBay store isn’t anything new. Now the serious sellers can setup prostore to sell the goodies. It’s funny that even before I lifted my finger to register my first account with eBay, I got a brochure from them about ProStores, a newly launched program that not only allows you to have all the benefits of the regular eBay store by listing your items on eBay and cross link them, but also host your website with your own domain and look and feel. Starting fee? $29.99 a month.

What is my plan?
Well, I do have a plan as which method to use. I will discuss that tomorrow.

Based on my past experiences as a part time real estate investor and home owner, location matters the most when it comes down to a piece of real estate. I usually would spend months trying to research a location before I put any money in it. In my definition, “Location, Location, Location” really means three different things:

1. Location – the city/county you will be buying. In LA, you are screwed cuz there ain’t any cheap affordable homes left. In Denver where I live, I can still find something
2. Location – neighborhood. I think this is the most important part of the location. The neighborhood must be desirable, safe and has great schools. I spent a great deal of my time researching the local school system when I was buying my home in Naperville, IL. Although I don’t have any kids, I know the first thing the family will worry about is “where will my kids go to school?”. Call me superficial, but the demographical information is also important. How many renters in the area comparing with home owners? What is the average age and how big is the average household? What is the medium income? What is the crime rate? etc.. Bottom line, you don’t want to live in somewhere that murder happens once a month.
3. Location: The home location. Whenever I look at a listing, I first looked up the address on Mapquest to make sure it is not facing a busy street, rail road or cemetery. My ideal home location would be facing a park, open area or a small street. I don’t even check the home if it is not situated desirably.

After spending a full month doing research (I wasn’t working at that time), I purchased a home in Naperville that is backing the most famous golf club community in the area with superb school system. The house has been going up by double digits each year! Too bad that I sold it after 20 months. If I would still own it today, I would make $30,000 just in 2005! It’s unreal.

Now, the whole game is starting all over again, but in a different location – Denver. I was using Chicago Tribune’s online tool to conduct research on schools and census data. After signing up with a realtor, I had full access to MLS listing. So now, I need the same kind of tools to cover the ground work and I have found three great sources:

1. www.schoolmatters.com – It shows you the public school reports at your finger tip.
2. Google’s housing report – It combines Google map and Census data so you know what people live in this area
3. www.zillow.com – It combines Google map and Real Estate transaction data to show you the history of sales and how much it is worth right now.

Combine with my usual tools like Census site, Realtor.com and finally the Realtor’s service, I have quite enough information to look around.

Soon, I will be going to Open Houses in the area I want to buy and start screening Realtors that fit my needs.

If you missed the first part about the options I have to run online store, here is the post.

Very clearly, I don’t think I will go with the regular e-Commerce channel. First of all, our kitchenware store has already had a domain and a hosting plan. Second, I can figure out the shopping cart and product catalog stuff with the open source code myself. The downside of the “doing it myself” approach is marketing and site traffic.

After running my own blog site for nearly a year, I am fully aware how long it takes for a website to be recognized by the search engine, thus drawing in the traffic. I launched my blog site Yuna’s Village last June. Despite all the cross-networking I did with other bloggers and sites, I could not draw more than 500 visitors a day. One day after Google updated its PageRank and assigned a 5/10 score to my site, I started seeing a surge in search engine traffic. A month later, my traffic increased to 1000+ visitors per day and stayed there. That took me nearly 8 months to accomplish.

Being said, I have made a “Multi-Channel” plan:

1. Start selling my own junk via eBay Auction. I have already registered a few days ago and selling 3 items at this moment. Here is my id: acmekwgloal
2. In one week, I will be receiving a pile of catalog of all the stuff my family’s store is selling right now. I will do a test drive by selling via “Buy it now” feature with eBay and see how the market reacts.
3. I think I will keep selling like that for about 3 months. During this 3 months period, I need to make good notes on errors/trials/lesson learned. Most importantly, I need to understand the competitors, the buyers, what sells and what doesn’t.
4. After the trial period, I am going to set up the pro store with eBay and transfer the domain. I thought about keeping the site at where it is and code the store myself. But I will miss out the big opportunity of the eBay traffic and the links from the eBay auction site. I also noticed that a lot of items people sell on eBay ranks high with Google too, thanks to eBay’s PR. Although I will be paying 20 bucks more each month to run the website and cut a chunk of profits to eBay, I don’t have to market my butt off to draw traffic. Since I get to use my own domain name, and have the freedom to design the site, the online store will keep it’s originality.
5. While selling on eBay’s pro store, I will have to use the usual techniques to market the site itself. I will increase the profit margins significantly if I can generate customers directly.

Why will this work? Because we’ve taken care of the most important part: Suppliers. We have tons of products for sell at rock bottom price, thanks to my parent’s hard work to set up this brick and motor store first. So I don’t have to go around and look for drop shippers myself. Hey, my parents are my drop shipper! How cool is that!

Regardless of the advantages I have, this is no quick money and it is going to take A LOT of work. But I am willing to do that now for the sake of future freedom. I may even discover other opportunities. You never know.