Category Archives: Income

Think You Can Get Rich ‘Running Your Own Business’ From Home? Think Again.

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NOTE: The old saying is as true today as ever: ‘If it sounds like it’s too good to be true, it probably is.’  Multi-level marketing companies involve soul-crushing work that could cause you financial ruin.  Stay away.

“I would love to talk to you about an exciting opportunity that could change your life.  Do you feel trapped in the corporate hamster wheel?  Did you know that you can make a six-figure income from home while only working a few hours per week?  Are you ready to take control of your destiny?  If so, click here, and start to change your life for the better today”

Worth all 30 minutes.

The start of today’s article brings us back to the summer of 2006.  I’d just finished another semester of school and was hoping to make some money.  Online job recruitment and Facebook (more on that later) barely existed, and the restaurant I’d worked at the previous summer was closed.  Feeling a bit desperate for prospects, I picked up the classified section of our local newspaper to see what was available.  One like this one caught my eye:

Ok, mystery job, you’ve got my attention: At a time when minimum wage was $5.25, the idea of flexible hours for triple the hour salary I was hoping for sounded like the perfect summer gig.  I called the number and reached a generic voicemail box saying “Hi, you’ve reached the affiliate recruitment office.  Please leave your name and number, and we’ll get back to you right away.” 

“Strange,” I said to myself.  “Affiliate recruitment office.  That’s an odd way to classify your human resources department.  Did I even called the right company?”

When I returned to my phone a few hours later, I had five missed calls and countless voicemails from two or three different numbers.  “Very strange,” I thought.

After a fleeting moment of excitement that they’d called me back, I came back to my senses and realized that something was a bit off.  ‘Barry’ sounded friendly enough but left very little information about himself or the job in his message.  Each voicemail sounded like he was more and more desperate to get in touch with me.  The final message mentioned something about maybe being from CutCo, but he still wouldn’t say anything other than how urgent it was that I call him back.  “Way too strange,” I concluded,

Yeah, this ‘opportunity’ was not normal, and I was not calling him back. 

An acquaintance of mine, who was also looking for a summer job, did interview with them.  Apparently, this ‘interview’ involved seven other people sitting in front of an overly friendly recruiter who eventually disclosed that the job was selling knives door-to-door to people you know.  There was no application, no background check, no employment agreement, and no weekly paychecks.  Rather, you, the salesperson, had to buy knives from the company and sell them to your network for profit.  The only piece of paper you had to fill out were the names, addresses, and phone numbers of every person you know.  If that weren’t enough, part of your commission compensation was based not only on your own sales figures, but also the sales figures of other people that you managed to recruit.  Whether through cold calling, social media, word of mouth, door-to-door sales, or ‘parties’ with your friends, the company wanted you to both sell outrageously priced knives and convince your network to join them.  They twisted the concept further by saying that you were ‘starting your own business’ and could be in ‘charge of your own earnings,’ though the actual compensation structure was confusing enough to make your head hurt.

In reality, however, the advertised hourly salary was just an average commission from people who had worked at the company for over a year and did not including their costs.  The base pay was nothing.  Instead, you were expected to buy your first few sets of knives for $500 per set and sell them for a profit to your friends and family.  You certainly did not own the business (they did), and in fact, you weren’t even an official employee, just an independent contractor with no salary, no benefits, and no protections.

In short, this company wanted you, the employee contractor, to pay for their products, hold onto the inventory at your home, and then become that person who tries to guilt their loved ones into buying the product to support your ‘business.’ 

Uh, no thanks!

The model being described here is called multi-level marking (or what I’ll call “MLM” for the remainder of this article), though it’s known or branded under a number of euphemisms including pyramid selling, affiliate marketing, home-based business franchising, network marketing, social retail, and referral marketing.” 

The basic premise is that the sales of products or services sold by the MLM is derived from a non-salaried workforce.  Each MLM has its own compensation structure, but it generally involves financial incentives to both sell (direct compensation) and recruit (indirect compensation – you may earn money when people whom you recruit make a sale).  The affiliates (you) are generally encouraged to buy products from the MLM, store them in your home, and sell them to your family and friends.  However, you are strong encouraged – even pressured – to sign up your loved one to be affiliates under you.  When they make a sale or recruit additional affiliates, you make a portion of everyone’s commission.

Multi-level Marketing (MLM) business… or pyramid scheme?

MLM model is alluring and not inherently unethical.  There is nothing wrong with incentivizing a workforce to sell or attempting to recruit others to sell on your behalf.

However, reality is that MLM’s almost never fulfill their promises and often lead to financial misery for those who join them.  There’s a fine line (or none at all) between an MLM’s and illegal pyramid scheme.  Let’s see why.

Problems with MLM’s Companies:

1) The model is unsustainable.

Anyone who has ever tried to start or participate in a chain letter knows that there are only so many times that an individual can connect to ten acquaintances before, well, the world runs out of acquaintances.  The MLM recruiter will try to convince you that it’s easy to be at the top and maintain a constant ‘downstream’ of people working under you, but the reality is that it’s nearly impossible to sustain that kind of network, especially in sales.  The market is not infinite, nor is it free from competition.  The only people getting rich are the executives are the very top, not you.

2) The failure rate is astronomical

The Federal Trade Commission in the U.S. found that approximately 99% of participants in the MLM’s they studied lost money.  That’s right; you will not only fail earn the ‘$17/hr’ that they promised, but also lose money 99 times out of 100.  The odds of achieving a sustainable living wage was approximate 1 in 3,900.  In one area, the average person lost $900 before giving up. There is evidence that gambling is a better financial bet than MLM’s. Starting a regular business is hard enough (39% success rate) but starting an “MLM business” is impossible (<1% success rate).  It’s not you; it’s them.

3) Their schemes target society’s most vulnerable. 

MLM’s advertising generally includes claims that appeal to those who are desperate for work, have a limited ability to leave the home, or are in severe financial hardship.  This is no accident.  These individuals are more likely to be drawn into the MLM’s cult-like claims of ‘becoming rich from your living room through our company’s exclusive offering,’ only to later realize that the MLM has taken their time, money, and pride in exchange for little to nothing.  The primary target?  Those where are underemployed, desperate, stay-at-home parents, financially uneducated, immigrants, or some combination of these characteristics.

4) They overpromise and underdeliver

The dream of ‘owning your own business,’ in the context of joining an MLM’s, is a hoax.  The claim of ‘a six figure income from your living room’ is a farce.  And the products themselves can be downright dangerous.  The only folks that come out on top are the executives and owners of the MLM organization itself, who tend to be very wealthy and politically powerful.  Ultimately, you ‘own’ nothing when you join an MLM, other than products bought with your own money.

5) They damage your social circle

We’ve all seen those cringy social media posts, received those awkward calls/texts, or answered those uncomfortable knocks on the door from people we know are trying to sell us something we don’t need.  MLM’s companies are behind each of these.  Rather than bringing people together, the MLM affiliates drive away family and friends who feel pressured to buy overpriced products that they don’t need or can’t afford.  I’ve personally seen friendships driven apart by these companies.  It’s devastating.

6) Their product benefits are best on testimonials, not science

In most parts of the world, medicine is required to go through rigorous scientific testing and government.  In return, medicine can be marketed in ways that discuss their medical benefits.  However, supplements (like those often sold by MLM’s) are not required to go through any testing, and they therefore cannot make medical claims.  Nonetheless, supplements can (to an extent) include so-called “testimonials” from customers that are supposed speak to that one customer’s experience.  Unsurprisingly, MLM’s often take advantage of this loophole and use testimonials to imply that their products have benefits, when in reality, their products likely have no benefits and may even harm you. 

7) Their compensation structure is confusing and deceptive

In a simple world, an affiliate would easily understand what he or she could expect in income – say, a 25% commission on each product sold.  In the real world of MLM’s, affiliates are faced with an overwhelming number of factors that affect their compensation: their amount and value of direct sales, what ‘rank’ they are, number of individuals they’ve recruiting, the amount and value of the sales of their recruits, number of consecutive months with certain sales goals, types of products sold, etc.  These factors are masked further using confusing company-specific language like base, front-end, mid-level, high-end, leadership, bonus, downstream, upstream, and pools.  Affiliates are told that they more they sell and recruit, they higher their level within the company will be (ex. bronze, silver, gold, platinum), but data shows almost nobody makes it past the lowest rank on the hierarchy.

8) Affiliates may be tricked into over buying low-quality products that are nearly impossible to return

In connection with #7, affiliates are told that if they don’t meet certain quotas each month, they risk being demoted a rank and earning smaller commissions.  The MLM’s encourages the affiliates to buy in bulk so they can ‘earn a higher markup’ and ‘keep your status,’ but as you now probably expect, most merchandise goes unsold.  Some products even have an expiration date. There are countless reports of products arriving damaged or too low quality to sell.  On the surface, the MLM may allow returns and refunds, but these refunds generally have strict terms like prohibitions on expired goods.  Also, returning product may cause the affiliate to lose commission or rank.  Out of fear, affiliates get caught in a vicious cycle or purchasing far more product than they can realistically sell.  The result? $1,000’s of unpurchased goods and crippling credit card debt.  Here’s just one of many stories like this.

9) They dodge regulatory oversight

MLM groups that are the worst offenders and have all the red flags of a pyramid scheme and all the signs of being a scam, rare is the day where the owners face any real consequences. Despite the billions of dollars that affiliates and consumers lose each year, only a handful or MLM’s have been fined or sanctioned. Those that do usually settle with the government without acknowledging they did anything wrong. Here in the U.S., several members of congress are former executives of these companies or have received campaign contributions from them. The MLM lobby is very real and very powerful. They also move their operations around the world at a faster pace than regulators can keep up with them to take advantage of less experienced consumers and politicians. Like I said, these organizations are run by extremely wealthy and powerful people!

So, who are the major MLM brands? 

Here’s a list of some of the largest ones in the world, with products and services such as skin care, healthy shakes, weight loss, candles, clothing, supplements, knives, life coaching, and even cannabis.

  • AdvoCare
  • Amway
  • Arbonne
  • Avon
  • Beachbody
  • Cutco
  • Herbalife
  • It Works!
  • LuLaRoe
  • Mary Kay
  • MonaVie
  • Nu Skin
  • Rodan + Fields
  • Shaklee
  • Stella&Dot
  • Telexfree
  • Younique
  • MANY MANY OTHERS

This article isn’t to say MLM organizations are evil.  Some aren’t.  Nor is it to say that a small percentage of participants won’t make money or be successful.  Some will.  Nor is it to say that you shouldn’t pursue an opportunity that genuinely brings you joy.  You should.

However, in trying times, a growing number of people are becoming increasingly desperate for stay-at-home work that pays the bills.  The MLM’s corporate executives are targeting vulnerable people stuck at home (due to the coronavirus or otherwise), and they are fervently recruiting, with promises to make all your problems go away.  Don’t fall into the trap.

Do you research, consider the products, understand the costs, analyze what it would truly take to become successful, and ask an independent source to give you an honest review.  It’s okay to accept that you’re probably going to be part of the 99% who earn less than $10 per week before costs. And sorry, but ‘your’ particular MLM organization is not different.  I wouldn’t roll those dice with my time or livelihood, and neither should you.

Are there side hustles that are more profitable and less soul-crushing than joining an MLM?  Why yes, there sure are.  Tune into the next article to find out all about them!

In the meantime, watch the John Oliver video at the beginning of the article. Who knows? It might actually change your life.

100 Money Hacks (that take 5 minutes or less) – Part 2: Increasing Income

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The second installment in our 5-part series (in which we examine 100 ways to improve your finances that can be done in 5 minutes or less) has perhaps the most eye-catching title of the bunch:

Making Money!

Part 1: Budgeting

Part 2: Increasing Income

Part 3: Spending Less

Part 4: Health and Wellness

Part 5: Everything Else!

That’s right.  While there are certainly some very time-consuming ways to increase your income, like going to college or breaking the world record fingernail length, the tips here can be completed or at least started in just 5 minutes.  And no, none will require even an ounce of luck, like having Bob Barker tell you that “You’re the next contestant on The Price Is Right!”

Is Bob Barker still alive?

Do people still watch game shows?

Anyway, without any further ado!

1) Keep learning. This one should arguably be #1 on all the lists. Showing that you care about continuing your development shows your manager that you are eager to contribute to the company. To get you started, there is a wealth of quality online material and courseware at little to no cost. Sign up in minutes for free courses using edX, Coursera, Duolingo (Google phones, Apple phones), or an industry-specific program to develop professional skills. If a full class is too much, watch a TED talk instead of TV or social media. Think about what skills you need to advance your career, and start learning them today. You may not see the benefit immediately, but incremental efforts pay off over time. Developing your skill-set is perhaps the most important factor to improving your salary in the long-term. Don’t let your talents become outdated; keep learning!

2) Research all your company benefits. You’re likely aware of the big ones like health insurance (including HSA’s), dental insurance, and retirement/401k/403b accounts and matching (You absolutely must do this if you haven’t… a whopping 1 in 5 employees ignore this truly free money). However, don’t overlook that your company may have some lesser-known benefits. Mine offers free passes to local attractions, a discount on a cell phone service, free disability insurance, free life insurance, and even a free fitness tracker through the health insurance plan, but you have to opt in. Ask your manager or HR for a full list of these benefits and take a moment to enroll.

3) Sell your skills or labor. Are you a proofreader? Translator? Transcriber? Writer? Driver? Mechanic? Cleaner? Handy person? Ironer? Web designer? Resume expert? Personal trainer? Dishwasher? Babysitter? Dog walker? Graphic designer? Entertainer? Tutor? Teacher? Gamer? Dungeons and Dragons expert? Friend? There are hundreds of websites for selling these skills, and most let you sign up and start offering your services in minutes.

4) Rent out your belongings. Services like Turo, Spot, and Fat Llama let you list items for rent like your car, parking spot, clothing, lawn mower, camera, bike, scooter, and wedding dress. Each transaction only takes a few minutes, and the cash you earn is a better bargain than your unused stuff collecting dust.

5) Rent unused space in your home. Most people think of Airbnb as a way to rent out an unoccupied house only, but you can easily rent out as little as an unused bedroom. You don’t have to do it all the time, just when demand might be high for your area. For example, Lady Centsei and I live near a university, and renting out a room for parents’ weekend or graduation could be hugely profitable, and we’d only need to deal with guests for a few nights per year. If the idea of people in your house is too uncomfortable, some sites will let you rent out space on your lawn or driveway too. Signing up is quick and easy.

6) Sign up for an online side gig. I haven’t used these personally, but a family friend who is a full-time student makes an average of $10 per hour on Amazon’s MTurk and another makes about the same doing online surveys. It’s not much, but this can be a nice supplement if you have a flexible schedule and a bit of extra time. A note of caution: use a reputable service, and don’t burn yourself out.

7) Sell unused household items on eBay/Craigslist/Amazon. Textbooks, video games, and electronics have decent returns on the second-hand marketplace, and let’s be honest, I know you have some extras sitting around your house. Price your items fairly and ignore pesky time-wasting buyers. If the goods need to be delivered in person, meet in a safe, public location. Only accept cash, bank-certified checks, or PayPal/AmazonPay to avoid getting scammed.

8) Sell a collection. Coins, POGs, video games, basketball cards, Pokémon cards, key chains, shot glasses, even unopened bars of soap from hotels… all junk I’ve collected over the years. However, maybe only one or two of these bring me real joy, and the rest was just a fad that came and went. If the collection has legitimate resale value to other hoarders collectors, sell it. I sold a dozen video games this way for no more than a few hours’ work and made over $500 from games I hadn’t played in decades. If it has no resale value, take a picture of it “for the memory” and donate it (tax advantages may apply) or trash it (for the peace of mind). Selling your jewelry, art, antiques, rare books, or sports memorabilia could not only generate enough money to pay off some debt, but also prevent your wasting additional money on the collection down the road.

9) Sell or donate your old clothes. A few times per year, Lady Centsei and I have a party where we go through and donate our old clothes, or sell the ones that are still in good shape. We pick up an old box and each go through our closets at light speed. An old but great rule of thumb is that if you haven’t worn it in the last year, then you won’t wear it in the next year. Donate it!

10) Return “that” thing. Another task we’re all guilty of putting off until it’s too late. We buy something we don’t need, saying “oh, I’ll just return that.” The window goes by and now you’re out some hard-earned dollars. Set aside a specific time each week to return everything you need to. Most companies make this easy. Pick a specific time each week/month to do returns. Every dollar that you get from a return is like earning $1.25-1.50 in income before taxes.

11) Ask for a raise. Public speaking, heights, the dentist, and asking for a raise all scare people more than death itself! Fear not. It is very normal to ask, and if you’ve been doing great work for a year or more, do not wait until its “time” for a raise. Today is the time to ask. Research similar roles for your experience level, make a list of your largest accomplishments, and find some time when your manager is in a good mood. Schedule a meeting and start the conversation by showing appreciation for your role and your increased responsibilities, and follow up by saying that you’d like to talk about increasing your salary to best reflect the value you bring to the company. If you have a specific figure or percentage, discuss it, but read the situation and offer a range if appropriate. Do not mention anything about your personal finances or bring up anything threatening or negative in the negotiation. Be open to other ways of increasing your compensation too, such as a bonus, added vacation time, or a more flexible schedule. If you still get a “no,” know that this may mean “not yet.” Your boss is human and may consider your accomplishments during regularly scheduled raises as well. However, it’s also possible that you may need to leave in order to find get a better salary, and that’s OK. Your skillset and work ethic will follow you anywhere.

12) Get started on a work project that will earn you a raise. Most of the progress I’ve made as a professional can be attributed to a handful of projects that propelled my career. I identified a task that needed to be done, volunteered to complete it in a time frame that I knew was realistic, went above and beyond the expectations, and was “noticed” by the right individuals upon the project’s completion. I stood out among my coworkers and reaped the rewards when it came time for raises, bonus, and promotions. Down the road, these projects helped me land jobs at other companies, as they were the best way to ensure my resume showcased my abilities. Your “project” doesn’t have to be at work, it could be a new hobby that you enjoy that helps you develop a special skillset. Data science, computer programming, people management, app/web development, artificial intelligence, and public speaking (conquer your fear!) are all high-demand skills that can be taught and mastered through projects.

13) Update your resume. As your network grows and as the economy weakens, very few people can ever have 100% job security. Take a few minutes to update your resume every 6 months (when you change your clocks) with even just a line or two of major recent accomplishments or proficiencies. If an opportunity does arise either at your current job or elsewhere, you’ll be prepared.

14) Update your LinkedIn/professional profile. Social media can be a time waster, and I see plenty of people get sucked down the rabbit hole of professional websites like LinkedIn using it as they would any other social media platform. Don’t. Rather, update your professional profile every 3 months with relevant information and remove anything outdated. You might get contacted by a prospective customer, business partner, or other opportunity worth pursuing.

15) Rebalance your retirement portfolio. Here’s a rule of thumb that I fully endorse: Your retirement portfolio should have stocks (riskier) investments equal to 100 minus your age, with the rest in low secure (low-risk) investments. In other words, a 30-year-old should have 70% stocks and 30% low-risk bonds. For a 75-year-old, 25% stocks. Once a year, take a few minutes to look at your IRA and 401k accounts, and make a few adjustments if you’re way off. Many brokerages and 401k administrators are offering something like a “Target Retirement 2050 Fund” that basically automatically does this for you. If the expense ratios are good, these can be a great focus for less experienced investors. Don’t do this every day, and definitely don’t panic and start selling when a recession hits.

16) Find a new bank. Changing banks can be a hassle, but so can excessive fees and low interest rates. There’s no one-size-fits-all approach here, so just prioritize what features are most important to you. High savings rates (yes!)? Low fees? Good online features? Quality products and services? Nearby locations? A brand (NO!)? Shop around for banks once per year, and be honest if yours is meeting your needs. If you can manage it, there’s nothing wrong with having more than one if, for example, one has an excellent savings account and one has an excellent checking account.

17) Open a high-yield savings account. If you’re earning any less than 1.70% in today’s market on your savings account, you’re missing out on free money. Do a Google search for “High Yield Savings Accounts” at both national banks and local ones, and take a few minutes to open an account. If you do, $1,000 in your savings account is almost $20 in interest per year in today’s rates. Tell me that’s not worth 5 minutes!

18) Open a brokerage/stock account. If you have 3-6 months savings in an emergency fund, and if you’ve maxed out your retirement accounts, and if you’ve paid off all high interest debt, then it might be wise to open an account with Fidelity or Vanguard to invest your excess savings in the stock market. Do not day trade stocks. Do not panic when the market fluctuates. Don’t pick fad stocks that your heard about on TV. Instead, invest in index funds that have low expense ratios and an acceptable risk profile for your age and risk tolerance. Invest for the long term and diversify your investments. “It’s about time in the market, not timing the market.”

19) Lend your money via a Peer to Peer lender. P2P lending is higher risk (and again, I do not give advice on this website), but this is a low-effort way to possibly generate higher returns. You lend money to qualified buyers at rates higher than your savings account; they borrow money at rates lower than their credit cards. You may want to consider this as a small percentage of your high-risk investments. Signing up and connecting an account can be done in minutes. Do your homework.

20) Ask for help from your friends and family. You’re not alone, and your trusted and knowledgeable social circle can be a great resource: looking over a resume, getting a lead for a new job, finding money-saving places or ideas, making resolutions, and so on (not all friends will give Centsei-approved advice). Think very carefully about asking your closest connections for a loan directly, however, as financial obligations and dependency can quickly complicate even the closest relationships.