Interview with Tom Slater: we meet the co-manager Scottish Mortgage Trust

Tom Slater, co-manager of Scottish Mortgage Investment Trust gives Edmund Greaves the lowdown on his fund – a Moneywise First 50 Fund for beginner investors.

What is Scottish Mortgage Trust?

Scottish Mortgage Trust is a 110-year-old investment vehicle. Despite its long history, it remains quite oriented toward the task of finding the world’s best growth companies. In doing that we aim to be very long-term owners of companies not traders of their shares.

We look for companies that have huge opportunities to grow, exceptional management, exceptional culture, and we think we have an edge in going after those opportunities.

By investing in these companies on behalf of our shareholders we aim to produce long-run growth and capital. Because we don’t trade a lot, we don’t consider market indices and we don’t try to ameliorate the effects of volatility.

We expect to be volatile, certainly relative to the market, but we believe that is the only way you can invest if you are to achieve that aim of long-term capital growth for shareholders.

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What are your top holdings?

While the fund has about 80 positions, this is very concentrated in the top holdings. At the time of the annual report at the end of March the top 30 companies accounted for 80% of the portfolio.

Our largest holding is Amazon, which accounts for approximately 10% of the trust’s assets. We bought Amazon in 2005 so it’s been in the portfolio for over a decade. We're more excited about it today than we were 10 years ago - the opportunity has grown.

If Amazon has been by far the largest contributor, it’s because it has brought new technologies to bear on an industry which was not prepared to embrace those changes.

The second largest holding is Illumina who are the makers of genomic sequencing machines. We believe Illumina and what they're doing in genomics is bringing the same type of radical change as Amazon to the healthcare industry.

Our criteria for investing in healthcare companies has been ones that reduce costs for the system as well as improving outcomes for patients. It has been pretty rare to find that combination. We think Illumina fits that description.

Alibaba and Tencent are the two next largest holdings. We've consistently believed that the growth of Chinese economy to become one of the world’s dominant economic forces would be one of the largest changes affecting the investment world.

That’s a view which has gone in and out of favour with the market. Its currently quite an unfashionable view because of concerns about Trump’s trade war with China.

China is the one place in the world where we see entrepreneurial drive and vision from companies that are able to scale in a way that compares to the phenomenal businesses that come from the West Coast of the US.

We invested in Alibaba in 2012, and in Tencent in 2009; both are long-standing holdings. I think what Alibaba is doing in the small- and medium-sized business space in China both through providing a retail portal and increasingly providing tools, software and payment services to those companies puts it in a phenomenal position to grow over the next 10 years.

What’s really striking is that whereas Western counterparts have a difficult relationship currently with government and regulators, these companies are seen as the enablers of many of the Chinese state's agenda, whether that’s driving financial inclusion or exporting soft economic power. They're supported even as they disrupt businesses of state-owned enterprises.

Scottish Mortgage Trust Key Stats:

• Launched: 1909
• Fund size: £7.6 billion
• Ongoing charge (OCF): 0.37%
• Yield: 0.57%

As at 4 October 2018.
Source: FE Trustnet

What have you recently bought and sold?

One of the trends in the trust over the past five to six years has been the growing proportion of investments that are not listed on stock markets. With many attractive growth companies in the world, we observed the trend that a lot of these companies are choosing to remain private longer.

Private companies have been a significant component of our new purchases. If you look at the recent past a number of these companies have actually gone on to list on the stock market.

In the unlisted space, Ant Financial is an online payments business that came out of Alibaba. That has been our single largest private investment to date at $250 million.

There are others such as Meituan-Dianping, which is a Chinese local services company oriented towards food delivery. It had its IPO in September. We've been owners of its shares for several years as a private company and we added to that holding as it moved to be a public company. The same is true of Nio, the Chinese electric car company.

In the listed markets, new purchases that we've made recently include Pinduoduo. This business is a Chinese online commerce platform. Its aim is to address the needs of half a billion or so people who have been slow to move online.

Pinduoduo is addressing that audience by providing a group-buying model. You can purchase an item online, and if you can get your friends, neighbours, colleagues to buy the same item then the whole group gets a discount. It’s quite a different retail format, but one which really resonates with the customer base.

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What drove the big cut in the fund’s charges this year?

We've tried to both cut the charges and grow value.

The trust's assets have grown meaningfully over the past few years, but we don’t believe in getting bigger for the sake of getting bigger. It only has value if we can use that scale to do things differently for our shareholders. One of the things that we can do is spread the costs over a larger base, sharing the benefits of scale by cutting the fees.

It was also about driving value. We've increased the proportion of the trust that is invested in successful private companies. It’s very difficult to get access to these types of investment opportunities. Most of the structures which are available charge substantial fees, often 2%, and some share of performance.

We provide a way for smaller investors to get access to these types of innovative growth companies, but without paying any additional fees.

What is the first thing you ever invested in?

My grandparents opened me a savings account with NatWest bank in the late 80s when I was around 10 years old. At the time you could earn with this bank account a family of five porcelain pigs, at different levels of savings, all the way up to the daddy pig. I invested in that account to try and save enough money to get the whole collection.

Within two or three weeks of starting work, 18 years ago at Baillie Gifford, I bought a flat. That was my first serious investment. Incredible as it seems the cost of a mortgage was going to be lower than the rent that I would have had to pay on a single bedroom apartment in Edinburgh.

I also started buying stocks on my own account around the same time, but starting work in September 2000 I managed to lose myself quite a lot of money over the intervening three years [thanks to the Dotcom bubble burst].

What’s been your best investment decision?

It was the decision to invest Alibaba in 2012. Yahoo had fallen out with Alibaba because it had been taking Alipay assets out of the joint venture. Yahoo management at the time felt that they were trying to steal the assets.

When Alibaba tried to raise money to buy them out many believed Yahoo’s version of events. We were large owners of Tencent and Baidu already, so we understood the power and value of the Alibaba platform and were happy to support the transaction.

The value of the company has gone up about tenfold since then.

And the worst?

One of the worst for me personally was Lending Club. This was an online marketplace for loans to individuals. We bought it when it came to the market, at the end of 2014.

Our average in-price in the shares in 2014 was $18.26, and we sold it in May 2016 for $3.99. It was pretty catastrophic.

The issue that they faced is they were trying to pursue some aggressive growth targets. Unfortunately, they cut corners in the pursuit of this. That really undermined the case for the business model, and the founder resigned.

It was a pretty painful experience. But we accept that some of these stocks go wrong because we're looking for companies that can deliver an outsized return. You have to take considered risks to do that.

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If you had one tip for an investor getting started today, what would it be?

It would be to focus on fees. Fees might look small as a percentage of the fund or investment today, but when you work out the maths of that over the years it adds up to a huge amount of money.

It is the one element of the investment that is guaranteed if you're investing in stock markets.

Minimise your fees, but always in the context of maximising the after-fee return.

The man behind the fund

Tom is joint manager of Scottish Mortgage Trust (SMT), alongside James Anderson. He joined Baillie Gifford (the firm behind SMT) in 2000 and worked in the developed Asia and UK equity teams before joining the long-term global growth team in 2009.

Tom became a partner in the firm in 2012. He was appointed joint manager of Scottish Mortgage Investment Trust in January 2015 having served as deputy manager for five years.

In 2015, he was appointed head of the US equities team and is a decision maker on long-term global growth portfolios. Tom’s investment interest is focused on high-growth companies, both in listed equity markets and as an investor in private companies.

sector-breakdown.jpg

Five-year discrete calendar performance of Scottish Mortgage Trust

Year	2013	2014	2015	2016	2017
Scottish Mortgage Trust PLC (SMT)	39.8	21.4	13.3	16.5	41.1
Sector Average
(IT Global)	21	7.4	6.8	21.1	23.5

Source: FE, 4 October 2018

top-10-holdings.jpg

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Fund Briefing: how to invest in future trends

There’s much to be said for investing in companies that are able to tap into future growth areas. Here’s what to look out for if you want to invest in tomorrow’s winners

Throughout history, investors have profited from backing exciting young companies that are able to benefit from future trends.

This is one reason long-term global themes such as technology and the environment are so popular. These areas are packed full of innovative, entrepreneurial businesses.

If you want further proof, consider how the internet and smartphone have revolutionised how we live and work. The world is constantly changing and so are the companies that will be successful, according to Patrick Connolly, a chartered financial planner with Chase de Vere.

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“WhatsApp gained more followers in its first six years than Christianity did in 19 centuries,” he says. “Investors cannot afford to sit still.”

In his opinion, investors should gain exposure to today’s winners, such as Apple, as well as keeping one eye fixed on the next generation. However, he acknowledges this can be tricky.

“It’s easy to recognise potential trends, but benefiting from them is more difficult,” he says.

“You must focus on long-term structural changes rather than ‘flavour of the month’ ideas.”

Mr Connolly also warns investors to be wary of funds that are focused solely on a particular theme, as they may experience a rocky ride.

“They tend to have all their eggs in one basket, so can be volatile,” he says. “While they could potentially produce spectacular returns, they could also be subject to major losses.”

Rise of robotics

Tom Riley, manager of the Axa WF Framlington Robotech fund, buys companies he believes would benefit from future trends, such as the growth of robotics and automation.

“Our research teams have identified five multi-decade, global, core themes that we think will drive and define the way businesses operate in the future,” he explains.

Alongside automation, these so-called ‘evolving economy’ themes include the connected consumer, ageing and lifestyle, clean tech, and transitioning societies.

“New technologies allow significant growth potential for robotics, such as semiconductor testing, manufacturing, assembly, food and beverage, and healthcare,” he says.

Simon Edelsten, manager of Mid Wynd International Investment Trust, notes that many companies in the robotics field, not just robot manufacturers, are beneficiaries of the theme. “Many of them have risen in price quite dramatically in the past 12 months,” he says. “Sometimes there’s better value to be found in the shares of their key parts suppliers.”

Quick guide: Is this approach right for me?

Consider investing in future trends if…

• You want exposure to interesting developments
• You want to invest for the longer term
• You are looking to diversify your portfolio

Themes don’t always need to be ground-breaking new developments. They can be in established areas that are expected to enjoy strong demand. For example, affordable healthcare is being driven by an ageing population and the financial strains on healthcare systems around the world.

Focus on long-term structural change, not ‘flavour of the month’ ideas

“There is growing demand for cheaper, more effective ways of delivering diagnosis, treatment and care,” says Mr Edelsten. “We are still able to find stocks at sensible valuations.”

Sustainable and ethical investing represents another area of interest.

“It has been led by the big pension funds in Europe and Japan, and is now becoming much more mainstream,” says Peter Sleep, a senior manager at Seven Investment Management.

The approach includes everything from eliminating companies involved in weapons to scoring them on emissions, corporate governance and gender diversity.

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Thematic tilts

There is also something to be said for smaller companies with global customer bases, says James Yardley, senior research analyst at Chelsea Financial Services.

“Since the Brexit vote, the average UK small-cap fund is 18% ahead of its larger peers. I doubt many people would have expected this two years ago,” he says.

Small caps are often under-researched, providing active managers with the potential to add value. “For those who can stomach the extra risk and are investing for the long term, we like small cap funds,” he adds.

Investing in the future is not a guaranteed route to riches, according to Adrian Lowcock, head of personal investing at DIY investment provider Willis Owen. Sometimes themes just fizzle out. “Thematic investing sounds great and it’s easy to understand big concepts, but it can be much harder to predict what the outcomes may be,” he says.

For example, it can be hard to pinpoint where the opportunity is within a theme. Mr Lowcock suggests 3D printing falls into this category.

“It hasn’t generated the anticipated returns. As is often the case, it isn’t the invention itself that makes the money, but the company using it effectively,” he explains.

There are numerous ways to get exposure to themes: you can buy individual stocks, a specialist fund, or gain a thematic exposure via a fund group’s overall approach.

“Some groups put more emphasis on the themes and trends that they believe are going to influence markets and investors over the next few decades,” he explains.

For investors targeting a particular theme, such as robotics, Mr Lowcock suggests an allocation of only 1% to 2%, with up to 10% in a broad thematic fund. He adds that a thematic overlay can complement a focus on value, growth or income.

“I don’t like putting all my eggs in one strategy or approach, so would suggest no more than 25% of the overall equity element,” he adds.

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Fund to watch: Newton Global Income

fund-manager.jpg

This fund invests in a cross-section of areas that are tipped to benefit from strong demand over the coming years.

Central to the portfolio’s philosophy – and one that helps guide stock selection – is Newton’s distinctive global thematic investment approach.

Companies that operate in exciting sectors such as technology, media and software feature in the fund’s top 10 positions. These include technology firms Cisco Systems (5.6%), CA Inc (3.5%) and Infosys (2.6%), beverage company Diageo (3.3%) and fashion brand Ralph Lauren (3%).

Adrian Lowcock, head of personal investing at DIY investment provider Willis Owen, likes the fund’s concentrated approach and its focus on buying companies with good fundamentals.

Newton Global Income’s manager Nick Clay (pictured) seeks to identify companies with strong management teams, a decent financial outlook and attractive valuations, based on dividend yield, cash flow and return on capital.

“Newton takes a thematic view, looking for big trends throughout the world, and then selects stocks which it believes will benefit from these themes,” Mr Lowcock adds.

Value of £100 invested in the fund over five years

Year	2013	2014	2015	2016	2017*
Fund percentage movement in year (%)	15.15	9.12	10	29.55	6.65
Value of £100 ** (£)	105.55	125.65	138.21	179.05	206.61

* Year to date to 3rd September, 2018 **The £100 was invested on January 1, 2013. Source: Moneywise.co.uk

Manager	Nick Clay
Launch date	30 November 2005
Total fund size	£5.6 billion
Minimum initial investment	£1000 (£250 subsequent min)
Maximum initial charge	0%
Annual management charge	0.85%
Ongoing charge	0.95%
Performance fee	None
Contact details for retail investors	0800 614 330; clientservices@bnymellon.com

Rob Griffin writes for the Independent, Sunday Telegraph and Daily Express

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Mortgage Rates Are Rising. Here’s What That Means if You Want to Buy a Home

Earlier this year, mortgage rates hit a seven-year high, fueling speculation that it was time to buy if you were in the market for a new house.

But mortgage rates have continued to climb since then — up nearly a full percentage point this year to 4.85% in mid-October. And data from the National Association of Realtors suggests potential homebuyers may finally be feeling the pinch.

Existing home sales have fallen 4% since January, and the number of new homes under construction has dropped 10% during the same period.

So far, a monthly mortgage payment on a $250,000 home has gone up about $150, Freddie Mac Deputy Chief Economist Leonard Kiefer told The Penny Hoarder. “And that is quite substantial.”

And with the Fed likely to raise interest rates further in the coming year, it will just get pricier to take out a mortgage in 2019.

“Economists across the board are starting to forecast higher rates,” Kiefer said. And a lack of new housing just keeps pushing home prices up.

Still, there is some pent-up homebuying demand. The U.S. has one of the tightest labor markets in years, so the market might see modest growth in 2019, despite rate increases.

So if you are ready to make the leap from renting to buying, there are concrete ways to find savings.

Mortgage rates and housing prices vary across U.S. cities and lenders, Kiefer said. So if you are still planning to buy a home, make sure to do your research on the local market. Also, shop around for the lowest mortgage rate possible.

Getting one additional quote before locking in a rate and buying a home could save you $1,500 over the life of the loan, according to Freddie Mac.

Once you find the right rate, here are some other slick ways to save money on your mortgage.

Alex Mahadevan is a data journalist at The Penny Hoarder. He’s feeling the sting of regret for not shopping around for his mortgage.

The Penny Hoarder Promise: We provide accurate, reliable information. Here’s why you can trust us and how we make money.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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New FICO Model Is Great if You Manage Money Well but Don’t Have Much Credit

Your credit score could get a makeover next year.

This week, FICO announced it will roll out a new credit score calculation system called UltraFICO. This scoring system will look at typical factors that go into a credit score, including payment history and credit utilization, but it will also factor in data from your checking and savings accounts that reflect your overall financial responsibility.

UltraFICO is an opt-in system, so consumers can choose what financial information to share beyond their standard credit history.

“Consumers who are relatively new to credit with limited history or those with previous financial distress that are getting back on their feet stand to benefit the most,” the company said in a statement. FICO’s new scoring program is a collaboration with credit bureau Experian and financial data firm Finicity.

 

A pilot program for UltraFICO is expected to launch in early 2019. If you’re interested in participating, you can request more information as it becomes available via the UltraFICO site (scroll down to the bottom to enter your contact information).

UltraFICO Scoring Features Will Be Cool, Eventually

 

Thanks to online tools, it’s easier than ever to access your credit score. But for many, evaluating their creditworthiness is still a mystery. The Consumer Financial Protection Bureau estimated in 2015 that 1 in 10 adults in the United States were “credit invisible,” meaning they didn’t have enough of a credit history to have a score.

 

A more robust scoring system would reduce pressure to use credit products to build a financial profile.

 

But don’t expect this new system to spread quickly.

 

VantageScore, another credit-scoring formula, rolled out VantageScore 4.0 in the fall of 2017. The system featured leniency for items like parking tickets and new medical bills, and it offered greater protections for victims of fraud. VantageScore 4.0 claimed it would focus on a person’s credit trends, rather than providing a snapshot.

 

But more than a year after that rollout, many online free credit score providers like Credit Karma, Credit Sesame and Wallethub still use VantageScore 3.0.

 

Lisa Rowan is a senior writer at The Penny Hoarder.

The Penny Hoarder Promise: We provide accurate, reliable information. Here’s why you can trust us and how we make money.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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Guide to Lenders Review | Personal and Home Loans Made Easier

Shopping around for a mortgage or a personal loan can be a tedious and boring task, but it can also take up a ton of your time.

After all, getting multiple quotes may require you to call several banks and answer the same questions over and over.

Fortunately, some lending aggregators make it possible to compare quotes from multiple lenders in one place, saving you time and precious mental energy in the process.

GuidetoLenders.com is one such website who connects consumers with quotes for personal loans, home loans, and home equity loans.

With Guide to Lenders, all that’s required is filling out a simple form to gain access to multiple loan quotes for you to compare and find the best deal.

If you’re in the market for a mortgage, home equity loan, or personal loan, you may want to check out Guide to Lenders and what they have to offer.

Keep reading to learn more details about their loans, their process, and the best ways to use this website to your advantage.

My Guide to Lenders Review: Key Takeaways

Here are the quick and dirty facts on Guide to Lenders:

• Guide to Lenders offers home loans, mortgage refinancing, home equity loans, and personal loans.
• Mortgage rates start at 5.64% APR.
• You can compare multiple quotes from lenders on a single platform.
• There are no hidden fees for using the Guide to Lenders website, but you may need to pay fees associated with your loan.
• You can see loan quotes without a hard pull on your credit report, and loans are available in all 50 states.

How Guide to Lenders Works

Since Guide to Lenders is a lead generation website, it doesn’t loan money on its own.

The website’s main function is connecting consumers with multiple loan quotes so they can compare offers to find the best deal.

Applying to see your loan options with Guide to Lenders is easy.

All you are required to do is fill out a simple questionnaire with personal details such as your:

• name
• address
• credit score
• employment status
• annual income
• zip code
• address
• email address
• zip code, and
• Social Security number

These will grant you access to multiple loan quotes tailored to your exact borrowing needs.

There are no fees required to use the Guide to Lenders website, nor is there any obligation to apply for any loan available to you.

In terms of the interest rates and loan terms you’ll be offered, this depends entirely on factors such as your credit score, your income, and your employment status. Loan terms will also depend on the type of loan you apply for, whether that’s a personal loan, a home loan, or a home equity loan.

In addition to helping consumers compare quotes from multiple lenders, Guide to Lenders offers a helpful resource section with tips on how to find the best mortgage and how personal loans work.

If you have questions about their products or wonder whether a specific type of loan is right for your needs, you can also explore their very helpful FAQ section for more information.

Is Guide to Lenders Legit?

If you’ve never heard of Guide to Lenders before, you can rest assured that the website is fully legitimate.

Guide to Lenders is owned by QuinStreet Media, which is a publicly-traded marketing company that was founded in 1999.

While QuinStreet was investigated in 2012 for using deceptive practices in their for-profit school marketing efforts, they enjoy a mostly good reputation among online lead generation and marketing professionals and firms.

Since Guide to Lenders doesn’t offer any loans themselves, however, you will need to conduct due diligence with any lender you’re connected to once you start the process.

On its own, Guide to Lenders was founded in 2005 and has managed over $16 billion in loan requests since its inception.

Guide to Lenders also works with over 150 different lenders that will compete for your business when you fill out a loan application.

However, you will not be inundated by loan offers from dozens of companies at a time. Guide to Lenders sorts through all the quotes on your behalf, connecting you with only the top five offers for your loan needs.

Pros and Cons of Using Guide to Lenders

Before you apply for any type of loan online or in-person, it’s important to understand the pros and cons involved in your transaction.

While Guide to Lenders doesn’t offer any loans on their own, there are still advantages and disadvantages that come with using this service.

Here are the main factors you’ll want to consider before you move forward with your loan inquiry:

Advantages of Using Guide to Lenders:

• Using the website is free. You won’t pay any additional fees to use the Guide to Lenders website to compare loan quotes.
• Comparing multiple loan quotes in one place can save you time. Filling out one questionnaire to receive multiple loan quotes across several lenders can help you maximize your experience and your time.
• Comparing multiple quotes can save you money. According to a 2012 study from the U.S. Department of Housing and Urban Development, Guide to Lenders cites comparing quotes from multiple lenders can help you save thousands of dollars on a typical mortgage note.
• It’s easy. Guide to Lenders is free to use but it’s also easy and entirely online. You won’t have to visit a stuffy lender’s office to apply for a loan, and the entire process only takes a few minutes.  

Disadvantages of Using Guide to Lenders:

• Your personal information will be shared. The biggest downside of applying for a loan with Guide to Lenders is the fact that your information will be shared with third parties who may contact you on their own. If you’re careful about sharing your personal information, this may make you uncomfortable.
• Mortgage loans are limited. Guide to Lenders only offers home loans and refinancing on residential property and not on commercial real estate.
• Loan rates and terms can vary. Because Guide to Lenders connects you with third-party lenders instead of loaning money themselves, you will have no idea the type of rates you’ll be offered until you apply. You will also need to conduct more due diligence before you choose among the lenders that offer you a free quote.

The Bottom Line

If you’re going to apply for a personal loan, a home loan, or refinance your mortgage, you should definitely get multiple quotes so you can compare them in terms of interest rates, fees, and loan terms.

Doing so can help you save money on interest while ensuring you get the best loan available based on your credit score and loan needs.

Guide to Lenders can help in this effort by connecting you with multiple loan quotes on a single platform.

The website is free to use and you can get started by filling out a simple questionnaire online and from the comfort of your home.

Also, note that getting preliminary quotes from Guide to Lenders will only result in a soft pull on your credit report.

In summary, you have very little to lose by accessing the Guide to Lenders website to compare loan quotes.

You do, however, have a lot to lose if you don’t compare quotes and wind up paying a higher interest rate or more fees than you would otherwise.

The post Guide to Lenders Review | Personal and Home Loans Made Easier appeared first on Good Financial Cents.

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When You Feel ‘Outclassed’ by the Financial Situation of Others, Consider This

I spend a fair amount of time each week reading personal finance books and websites and other materials in order to come up with strategies to employ in my own life that might eventually turn into good material for articles, as well as to find answers to questions that readers ask. In the course of that reading, I often bump into the life stories of people who make a lot more money than I do.

I’ll see stories of families making hundreds of thousands of dollars a year, or even millions a year. I’ll read about people with houses straight out of Architectural Digest, driving BMWs, going on long trips all over the world, and managing portfolios worth millions or tens of millions or even more.

When I read those stories, there’s an inner voice inside of me shouting that these people are living a lifestyle that’s unrelatable to my own and that there’s literally nothing I can learn from them.

That’s decidedly untrue (and we’ll get to why in a minute).

At the same time, I’m aware that Sarah and I combined make a little more than the average American household income. We don’t rake it in hand over fist by any means, but we do all right. We own our home. We are able to put a healthy amount of money aside for retirement (largely due to our personal choices).

For some people, our story is just as unrelatable. There are readers who read The Simple Dollar and, I’m sure, have that inner voice shouting that the story being told here is unrelatable and thus there’s nothing that they can possibly learn from the site.

When you feel like that, step back and consider some things. There is still a ton of useful information to be found, perhaps even more than you’d find in a story from someone similar to yourself.

Are You Seeing the Full Picture?

The first thing to consider is whether or not you’re seeing the full picture of this person’s story.

Condensation: Often, someone’s story is condensed down to a few sentences and a few numbers that do little to actually convey the full story of their life. Those numbers create a particular image in your head that is often not close to the truth of their life.

For example, let’s say I’m reading about Jim, who makes $105,000 a year and is struggling to make ends meet. To me, on the surface, that might be unrelatable. But let’s dig deeper.

Jim is living in San Francisco, which has the highest cost of living in America. The buying power of $105,000 in San Francisco is the same as $50,000 in Des Moines, or even less in rural Iowa where I live. He can barely afford rent on an efficiency apartment at those prices. Jim is dealing with a pile of student loans.

Yes, if Jim lived down the road from me and had that same exact job, he’d be in much better shape. If Jim wasn’t facing a pile of student loans, he’d be in much better shape. But that’s not the reality of Jim’s life.

However, if I look at just one sentence of information about Jim – “Jim makes $105,000 a year and can’t make ends meet” – he seems like a person with a big spending problem that I can’t relate to. Look a little closer and the problem seems much more relatable and relevant.

There are many, many, many factors in a person’s story that often aren’t revealed due to brevity. You don’t know if a person is taking care of their parents or if they’re receiving help from their parents. You don’t know if that person is dealing with an unstated medical issue. Often, you don’t know where that person lives and how that cost of living compares to where you are – there are huge differences in different places in America, let alone on a global scale.

Don’t just blow off a person’s story because of a one sentence or a one paragraph description. You often have more in common than you think, even if the numbers don’t seem compatible at a glance.

Truthful numbers: Another factor, one that often pops up on message boards or on sites where individual anonymous users submit comments, is that people are often dishonest even about the few numbers they reveal. They’ll often overinflate their income or make unbelievable claims about their investing prowess or some other nonsense.

Take such claims with a grain of salt. Don’t assume that “billybob303” who claims he is making “$200K” and has “$1.2M in stocks” is being fully honest with you. (In fact, you’re probably better off avoiding the advice of “billybob303” entirely.)

Life choices and challenges: Another factor to consider is all of the life choices and challenges that have made up that person’s path.

For example, you might be reading the story of someone who has spent their entire life working extremely hard to reach a career goal. They may have spent their high school and college years hitting the books while others partied and then busted their tail for years to get to their current career and income level.

Or, you might be reading the story of someone who has overcome mental health challenges, or had to help raise their younger siblings when their parents died young, or any number of things.

Be careful not to add your own assumptions to the story that makes it easy for you to discredit that person. Just believing someone is “lucky” or someone was “helped” or someone had “privilege,” true or not, means that you’re cutting yourself off from what you might learn from the story.

How Are They Struggling?

Understanding their background is only part of the picture. Each of us is struggling today with different things, and understanding that can change how you view a story.

Life challenges: That person might be dealing with a health issue that they’re not talking about. That person might be caring for a sick elderly relative. That person might be highly involved with a charity and constantly spends their pocket money helping it out without tracking receipts. That person might be dealing with an angry boss or a manipulative ex. That person might be trying to connect with an angry fifteen year old child. That person might be dealing with mental health concerns. There’s always more to the picture.

Almost every single person you meet is dealing with some kind of challenge, whether you see it directly or not. Often, they never speak of it, because all of us want to put our best face forward to the public. We talk about the high salary, not about the stress or the endless hours of work or the damage it does to our relationships or the sacrifices we had to make to get there.

Poor spending choices: Many Americans are simply not aware of personal finance on a day to day basis. They’re vaguely aware that they should save for the future and that they should save for retirement, but our cultural moment is one in which people are inundated with examples of affluent lifestyles and people unconsciously try to match those lifestyles to the best of their ability and then use their money to keep the scaffolding in place.

This doesn’t make them bad. It makes them normal. It makes them people whose focus has been on other areas of their life – see the struggles and life challenges listed above.

When you read that someone is making a lot of money but was “struggling to make ends meet,” that person likely was using their limited amount of focus left over from their career and life challenges and stress to focus on other areas of their life – their marriage, their children, their community standing, the causes they care about, and so on. That doesn’t make them bad, and it doesn’t make their financial changes somehow unworthy.

Indecision: At the same time, many people don’t make financial changes due to indecision. They’re often unsure what to do. Heck, I’m sometimes unsure what to do.

What that means is that people will often end up repeating the same mistakes over and over and over and over again until the drawbacks of those mistakes accumulate to an overwhelming level. In other words, people dig a nice deep hole for themselves. Often, the hole is so deep that their current financial level isn’t going to fix it immediately, even if they seem rich to you. Sure, they might have a 20 foot ladder which would be perfect for the 20 foot hole you’re in, but they find themselves in a 40 foot hole.

What Strategies and Tactics Are They Actually Using to Succeed?

The point of all of this is simple: you cannot simply take someone’s story at face value. At first glance, they might seem to be so far apart from your situation that there’s nothing you can learn, but consider filling in the blanks in a different way and you might see a story more similar to yours than you think, and when you see that similarity, then you can step past the story and look for the real value – the strategies and tactics they’re using to succeed.

The truth is that almost anyone who is working seriously toward a goal similar to your own probably has strategies and tactics you can learn from. The trick is to look past the differences in their story and look for what’s the same – the big goal.

What you’ll find is that if you look closely at almost any story of someone turning around their finances, you’ll see a handful of tactics that pop up again and again, regardless of income level or situation.

Hard work: The turnaround isn’t going to be easy. It’s going to require making some hard decisions and some lifestyle changes. The path of least resistance is how people get into a financial mess, and getting off of that path is how people get out of a financial mess. People will have to step out of their comfort zone and do things differently.

Spending less than you earn: This is the core principle of every financial story. How can you live your life while spending less than you’re earning? Then, how do you use that extra to fix your financial situation? Virtually every financial success story holds this at its core.

Avoidance/elimination of high interest debt: You’ll never see a story of financial success that involves taking on high interest debt. Why? It’s financially disastrous over the long term. There are situations where low interest debt – a home loan or a refinance or a student loan or a first car loan – might be the right call. However, financial recovery doesn’t involve payday loans or credit cards.

Investing: Once the person has their debt under control, they’re usually looking at doing something productive with their extra money while they continue to spend less than they earn. That extra money goes toward big goals, often retirement.

It doesn’t matter whether that person is earning $30,000 a year or $800,000 a year, those are the elements of the backbone of virtually every financial success story out there in which people fixed things for themselves. Don’t look at what’s different. Look at what’s the same.

Do the Specifics Apply to My Life?

Once you see the big picture and realize that the high income earner is actually on much the same journey that you’re on – fixing their spending, fixing their debt problems, saving for the future, overcoming bad habits, learning to spend less than they earn – then you can start looking at the details.

Hard work: How is this person making difficult choices? What are they thinking about when they make those choices? What are they prioritizing, and what are they not prioritizing? Are those priorities that I share?

Spending less than you earn: What spending cuts is this person making? Are those bills that we share? Can I make similar cuts to those bills? If this person is squeezing 20% out of their food budget by eating at home more, can I do the same?

Avoidance/elimination of high interest debt: How are they cutting the credit card addiction? What’s their debt repayment plan? How can I use what they’re doing to improve my own plan? Remember, millionaires sometimes realize they’re in a debt hole and cut up their credit cards, too.

Investing: What are this person’s investing goals? How are they going about reaching them? What are they choosing to invest in, and why? What kinds of accounts are they using, and why?

Whenever you see someone’s story, those are the questions you should be asking, once you realize that they’re actually struggling with many of the same financial issues as you are. What are they doing about the similar issues that they’re facing?

The Big Picture

The big picture is this: We often focus on the differences between us and use that as a reason to avoid thought and action when what we should be doing is looking for the similarities and using those similarities as a source for ideas and inspiration. It is so, so easy to just turn off the brain when you see someone making five times as much as you and living an amazing lifestyle. Surely that person’s life has nothing to do with yours. However, their principles of financial success are basically the same as yours.

Spend less than you earn. Avoid and eliminate high interest debt. Invest for the future. Make hard choices.

That’s the story, and that story is repeated again and again, regardless of income level and background and specifics.

Don’t worry about the specific numbers. Don’t sweat that person’s income right now or their net worth. Instead, focus on the goals they’ve got for themselves, the basic structure of how they’re trying to achieve those goals, and then see what you can learn from their approach. You might find you can learn a lot more than you think, and if nothing else, it’s incredibly powerful to see that so many of us are really in the same boat.

Always be looking for similarities to your own situation rather than differences. When you do that, you’ll see solutions and answers all over the place.

More by Trent Hamm: 

• The Rich Man, the Average Budget, and You
• Different People, Different Goals
• How to Get Over Feeling Envious of Other People’s Money and Success

The post When You Feel ‘Outclassed’ by the Financial Situation of Others, Consider This appeared first on The Simple Dollar.

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Mystery Shopping Scams Are Soaring in 2018 — Here Are 5 Ways to Spot One

It seems easy enough: You get a message through Facebook or LinkedIn. Or you receive a cashier’s check in the mail out of the blue from a mystery shopping company. It instructs you to shop at your local grocery store and email a representative with pictures and details about your experience.

Then you cash the check, keep some money for yourself and send the rest to the company.

The only problem: That cashier’s check is likely a fraud.

Mystery shopping can be a legitimate way to make some cash on the side. But scammers are using the brands associated with many of those opportunities to steal money from would-be shoppers.

The Penny Hoarder analyzed the 1,000 most recent complaints about mystery shopping scams filed with the Federal Trade Commission (FTC). We obtained the data set through a Freedom of Information Act request that took five months to fulfill.

Unfortunately, according to our analysis, the problem appears to be getting worse — much worse.

The FTC logged 557 complaints about mystery shopping scams in its Consumer Sentinel Network database through the first three months of this year. That’s nearly 150 — or 37% — more than it received for the entirety of 2017.

Meanwhile, overall consumer complaints have fallen over the last two years, according to FTC spokesman Frank Dorman.

The increase in mystery shopping complaints could be due in part to state and local agencies reporting more complaints to the FTC or the public becoming more aware.

“There’s no way for us to know why complaints rise and fall,” Dorman said.

But with 2018 on track to log more than 2,200 complaints, it’s likely scammers are also casting a wider net.

In 2017, people reported losing $47,333 to mystery shopping scams, according to the FTC database. In the first quarter of 2018, the FTC received complaints about $468,897 paid to suspected con artists — a figure on track to easily break $1 million this year.

And these are probably low estimates, given that many cybercrimes go unreported.

How a Mystery Shopping Scam Works

One common mystery shopping scam involves “testing” a transfer service, such as Western Union, at a Walmart or other grocery store, according to the FTC. In this scenario, you’ll get a check in the mail and might even see money appear in your account.

Then, you send some of that money through one of those wire services. Or you might be asked to buy refillable gift cards and send the card to the scammer. Either way, the bank will eventually determine the check was fraudulent.

And the worst part is: You might be on the hook for the fraudulent check.

“Your bank may take several days to weeks to determine the check or money order you deposited into your account was counterfeit, even though the funds ‘arrive’ in your account after a day or two,” wrote U.S. Postal Inspection Service spokeswoman Andrea Avery in an email to The Penny Hoarder. “You, as the account holder, are responsible for money deposited [into] and withdrawn from your account, so you may be liable when the check ultimately fails to clear.”

Most mystery shopping complaints revolve around cashing fake checks, but the FTC also reminds consumers that they should never pay a subscription fee just for the opportunity to become a mystery shopper.

5 Signs of a Mystery Shopping Scam

If you think a mystery shopping gig is too good to be true, you’re probably right. These tips can help you spot a potential scam.

1. First of all, any time someone asks you to wire them money after depositing a check, it’s going to be a scam.
2. Have you ever contacted this company or representative in the past? If this is an unsolicited opportunity, your scam antenna should be at attention.
3. Does the email, letter or message look like it was written by a 6-year-old? If it’s littered with misspellings or grammatical errors, it’s probably fake, according to several narratives in the FTC data set. (Although one could say the same thing about the first draft of this article written by a data reporter.)
4. Look at the company logo included in the letter, memo or check the supposed company has sent you. Match it with what you find on the company’s official website. One FTC complainant noted that materials sent from a firm called American Consumer Eyes bore grocery store ShopRite’s logo, but it was black and white, and out of focus.
5. And it’s worth repeating: If you pay for a “subscription” to become a mystery shopper, you’ll likely lose whatever you pay.

There’s no telling where these scams are coming from, but the most common city that popped up was located far from the U.S. —  in the Greek isles. Larnaca, Cyprus, a city of about 144,000 with a tourism-based economy, was included 17 times.

Again, the FTC couldn’t explain the prominence of this city in the database. Nor could it explain the names of individuals supposedly representing the companies.

Brian Anthony and Alex Baker were the most frequently used names in these mystery shopping scams.

Con artists tend to use trusted brand names, according to the FTC database. Walmart and Kroger were frequently featured in fraudulent materials.

The Penny Hoarder even came up once in the 1,000 entries in this database. In fact, a complaint from a reader prompted this entire investigation. We responded to the incident in April.

The mystery shopping scams included in the database targeted victims as young as 13 and older than 80. Although millennials were actually targeted more, it was clear the elderly were the most vulnerable. People older than 59 were scammed out of a combined $317,645.50 since the beginning of 2017.

New Mexico had the most per-resident complaints — more than double the second-most targeted state, Texas. Again, FTC and USPS representatives couldn’t say why this is the case.

How to Report a Mystery Shopping Scam

If you were contacted through the mail, the USPS recommends reporting the fraud through its website or by calling 877-876-2455 and saying “fraud” when prompted. The FTC also urges you to file a complaint with its office, as well as your state attorney general’s office.

If you live in a city with a large population of retirees, like where I am from in Sarasota County, Florida, your local police office might have its own cybercrime unit that can make sure you file the correct paperwork with the corresponding agency.

Compile as much information as you can with the materials you believe to be a scam. What was the name of the potentially fictional representative or company that contacted you? What was the return address on the material you received?

This will help whatever agency you contact root out scams like these in the future. In turn, this will give us more data for future investigations. Win-win!

Both the FTC and USPS continue to publish information on their websites and through YouTube, and they’re even pounding the pavement across the country raising awareness about these scams.

The top piece of advice from both agencies: Always be skeptical at first for the best chance of staving off a scam. If you send money, it’s probably too late.

“If you try to get a refund from the promoters, you will be out of luck,” Dorman said. “Either the business won’t return your phone calls, or if it does, it’s to try another pitch.”

Alex Mahadevan is a data journalist at The Penny Hoarder. His dream mystery shopping gig involves record stores and skate shops.

The Penny Hoarder Promise: We provide accurate, reliable information. Here’s why you can trust us and how we make money.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

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Suffer From the ‘Sunday Scaries’? Conquer Them With These 6 Tips

How to Answer the Dreaded Question 'What Are Your Salary Requirements?'

How can you answer the salary requirements question without selling yourself short? One expert says, "Just say no."

Source Business & Money | HowStuffWorks https://ift.tt/2Cx84TT

How to Answer the Dreaded Question 'What Are Your Salary Requirements?'

How can you answer the salary requirements question without selling yourself short? One expert says, "Just say no."

Source Business & Money | HowStuffWorks https://ift.tt/2Cx84TT

Need Some Money Motivation? Try the Buddy System

On and off over the years I’ve had gym buddies I could rely upon to keep me showing up for workouts even when my inner couch potato was itching for another hour of Netflix.

Yet it never occurred to me that the same buddy system could be applied to my financial challenges.

Not until a recent playdate at McDonald’s, that is, when I confessed to a good friend — who’s far more financially savvy than I — what serious debt I’ve accumulated recently. Within 30 minutes, as our kids screeched with glee on the jungle gym, she had mapped out a detailed action plan for my financial recovery. And we agreed to check-in on my progress at regular intervals moving forward. Insert fist-bump here, because yes, that’s really how we wrapped up our little financial chit-chat over French fries and Happy Meals.

As a single mom who doesn’t have a partner to discuss finances with (or to rein me in during my most impulsive moments, which I sheepishly admit are all too frequent), this was just the lifeline I needed. I had officially found a financial buddy.

The thing is, most Americans are too embarrassed to talk about money. A recent survey by LendingClub found that Americans are nearly twice as likely to talk with others about marital or relationship issues than credit card debt.

“In today’s connected world, people talk publicly about a variety of topics that used to be private – from sexual orientation to political affiliation – but money remains the last taboo,” said Steve Allocca, president of LendingClub. “This silence compounds the issues and poor financial health negatively impacts other key areas in people’s lives, causing many to feel shame or isolation. We need to remove the stigma and start engaging in conversations more openly on financial health.”

As a society we need to shed ourselves of this hang-up about money once and for all. There’s good reason to do so: A 2014 study by Dominican University of California backs up the value of the buddy system with science.

As part of the study, psychology professor Gail Matthews discovered that participants who sent weekly updates to a friend about their goals were far more likely to achieve what they set out to do. In fact, the group of study participants who were asked to formulate action commitments and send their goals, action commitments, and weekly progress reports to a supportive friend achieved significantly more than other study participants who did not engage in such behavior.

More than 70 percent reported completely accomplishing their goals or being more than halfway there compared to 35 percent of those who kept goals to themselves and didn’t even write them down.

The moral of the story? If your finances are not what they should be, it may be time to find a financial buddy of your own. With that in mind, here are some tips from financial professionals about how to get your financial buddy system going, and who makes a good money buddy.

Getting Started

In her book “Wealthy by Choice: Choosing Your Way to a Wealthier Future,” certified financial planner Ilene Davis dedicates a chapter to the concept of establishing a financial buddy system — or rather, creating an entire posse of financial cheerleaders.

Titled “Millionaire in the Making Support Group,” the chapter provides an ideal road map for those in search of the tools to establish and maintain a financial support system.

“Start talking to friends about your goals,” advises Davis. “You turn to someone and say, ‘Are you doing anything about retirement?’ If they say no, say, ‘Is it something you have thought about, because I’m looking for someone to help me stick to my game plan and doing it alone is really tough. I’m looking for people who might have similar goals and we help each other make wealthier choices.’”

If you’re feeling really bold or adventurous, you might even consider creating a Millionaire in the Making Meetup group or Facebook group.

The key is to surround yourself with people who have similar goals, said Davis, adding that when you hang around with individuals who are constantly buying the latest gadgets or a new car all the time, then it’s likely you’ll follow a similar behavior pattern.

But creating a support group of like-minded people or identifying a single buddy can help you stay on track in multiple ways. “If you’re tempted to buy something you don’t need, you’ll have someone to call who can help you understand why it’s not a good idea,” continued Davis.

What’s more, you can organize frugal approaches to entertainment and outings with these same individuals, further helping you to reach your goals.

“You can plan events that allow you to have fun together, but not necessarily spend money,” said Davis. “For example, instead of going out to the movies, and probably spending $10 to $20 each, get a group together, rent a movie, and put a couple dollars in for pizza or subs, to share.”

The Nuts and Bolts

Some studies have shown that the best exercise partner is someone who’s about 40 percent more fit than you are, because he or she will actually motivate you to work out longer and harder.

“That principle can be directly applied to your budget and financial health,” says Sara Skirboll, of the coupon and savings site RetailMeNot. “Look for a budget buddy who has a strong budget in place and a history of smart financial choices – this will help inspire you on your budget journey.”

Once you’ve identified that person, establish your financial goals and then sit down together to map out a plan for one month, three months and six-months-worth of benchmarks to get you to those goals.

“You should align these times with check-ins with your budget buddy – the accountability of having your buddy will motivate you to actually accomplish your smaller goals as you aim to reach your big goal,” said Skirboll.

It Can Really Work

Sha’Kreshia Terrell is living proof that the buddy system pays off.

She and her accountability partner have gotten rid of a staggering $70,000 worth of debt since joining forces in 2016 to help each other achieve financial goals.

An accounting clerk and founder and CEO of Humble Hustle Finance, 27-year-old Terrell had accumulated about $45,000 of that debt on credit cards and car loans, while her friend had accrued about $25,000.

At the beginning of each month, Terrell and her partner write down a list of clear goals they want to achieve before month’s end and send them to one another.

“We do this because it’s easy to get distracted in life and when motivation is lost throughout the journey, the other partner is there to help get oneself back on track,” she explained.

When they need still more inspiration to remain focused, Terrell and her friend get up on a Saturday morning and hit some open houses, daydreaming about owning a home themselves someday, and then head home to write down their plans to make those dreams a reality.

The duo has also learned to recognize each other’s spending triggers over the years.

“If I see a deal that I know she will fall for, I quickly pull out my phone and send her a text to remind her of her goals and to motivate her to move past the deal, vice versa,” said Terrell. “We talk daily. Our conversations have gone from talking about going out to eat or shopping to talking about goals and what we want out of life.”

All of the effort has paid off. Of that original $45,000 in debt, Terrell now owes a mere $3,500. The finish line is finally within striking distance and Terrell says she wouldn’t have made it nearly as far, as fast, without her buddy.

“It probably would have taken me a lot longer without her because it’s hard to motivate myself. We’re kind of there to motivate each other and remind each other,’” she explained. “I wish more people would be comfortable talking about their financial situation, rather than being embarrassed. You have to find that trustworthy friend or partner who can motivate you when times get hard.”

More by Mia Taylor:

• Key Conversations You Need to Have Before Retirement
• Five Situations Where Money and Emotions Don’t Mix
• Refinancing Your Mortgage to Pay Off Student Loans: Tempting, But Use Caution

The post Need Some Money Motivation? Try the Buddy System appeared first on The Simple Dollar.

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