Thursday, March 13, 2008

success means courage of your convictions and your moneytree

Success Secrets from Mike Wallace, Mary Higgins Clark, J.K. Rowling and More

Dyan Machan ow did Mike Wallace of 60 Minutes become TV's most celebrated investigative reporter? How did Mary Higgins Clark become one of the world's highest-paid writers? How did Diane von Furstenberg come to head a multimillion-dollar fashion empire? Certainly they all have talent, but plenty of talented people never reach the top. Talent leads to extraordinary success only when it is paired with smart decision making. As J.K. Rowling wrote in Harry Potter and the Chamber of Secrets (Scholastic), "It is our choices... that show what we truly are, far more than our abilities."

How do successful people make the right choices and manage to see things through? By doing the following...

1. Get more credit for accomplishments. We might get a bonus or a promotion for an idea that makes our employer money, but most of the spoils go to the company. Capturing a significant share of those gains for ourselves can mean the difference between a solid career and a hugely successful one.
Example: Michael Flatley, star of the hit Irish step-dancing show Riverdance, left in 1995 to start his own show, Lord of the Dance. He had seen the money other people were making from his dancing and risked his savings to make those profits his. He gives his net worth now as close to half a billion dollars.

2. Stand out from the pack. Doing what everyone else is doing rarely leads to extraordinary success.

Making the leap from talented to spectacularly successful often involves a decision to take the untrodden road.
Example: Shoe designer Kenneth Cole spent his entire advertising budget for 1986 on an ad about AIDS that ran on billboards and in 23 magazines. His advisers warned him that it could kill his company to be associated with the disease. Instead, the ad campaign generated so much buzz that it helped him stand out in the crowded shoe market.

3. Discover what is really important. Sometimes a crisis or tragedy can force us to reevaluate our lives.
Example: In the 1950s and early 1960s, Mike Wallace made a good living reporting the news, hosting game shows and appearing in commercials. Only after his 19-year-old son, Peter, died in 1962 did he devote himself to investigative reporting. The tragedy convinced him to make a change despite the financial risks.

4. Find a role model for facing fear. Diane von Furstenberg, founder of a hugely successful clothing company, reminds herself that her mother survived a Nazi concentration camp. Compared with that, what is there to be afraid of in a career decision?
Successful people tend to understand that it isn't our failures we'll regret at the end of our lives -- it's the opportunities we let slip away.
Example: Drew Nieporent, founding chef of famed New York restaurant Nobu, learned to take risks because his parents could not. His father talked for years about buying New York City real estate but was too scared to take the plunge. His indecision cost him millions of dollars in potential profits. Nieporent decided that when he had an idea he believed in, he would act.

5. Know what's worth the risk for you. Successful people don't always know that their crucial decisions will work out when they make them, but they are willing to take the risks to pursue their dreams.
Example: Singer Sting had a burning desire to be a musician, so he left a secure job with Inland Revenue (England's IRS) for a job as a teacher. The shorter hours gave him time to pursue his music.

6. Remember, there are second chances. The old saying about opportunity knocking only once isn't always correct. If we work hard and interact with a wide circle of people, we might get multiple shots at making life-changing decisions.
Example: Mystery writer Mary Higgins Clark's first book, a biographical novel about George Washington, was a commercial disaster. She determined that thrillers sold better and got back to work. She now makes more than $12 million per book.

Bottom Line/Personal interviewed Dyan Machan, an award-winning financial journalist, based in Ridgewood, New Jersey. She is researching a forthcoming book about decision-making.

How to Get Cash in a Flash your money tree
Madeline Noveck, CFP
Novos Planning Associates, Inc. uppose life throws you a curve ball and you need money fast. Where can you get the cash? Options -- and traps to watch out for...

1. Ask your employer for an advance. The terms may be informal or written as a promissory note. This option works best when the need for immediate cash is very small and the boss is approachable.
2. Borrow from your relatives. This quick fix comes with emotional potholes. If you don't repay the money, there may be resentment from the lender, as well as from other relatives who may feel slighted or jealous.
What to do: Use a formal promissory note stating the interest rate and repayment terms.
Trap: Without such a written note, the IRS may bar the lender from writing off a bad loan on grounds that it was a gift.
Caution: Such a loan doesn't have to bear interest. But if it does, the lender must report that interest as income. If the loan exceeds $10,000, and the interest is below the applicable federal rate (AFR) -- currently just under 5% -- the lender must report not only the actual interest, if any, but also the "imputed interest," which is the difference between the actual interest and the AFR.
More information: At the IRS Web site,, type "applicable federal rate" into the search box.
3. Borrow from your 401(k). If your plan allows it, under federal law, you can borrow up to 50% of your vested account balance or $50,000, whichever is less. You usually have up to five years to repay the loan.
Advantages: You can't be rejected for the loan -- you may only need to make a phone call to the plan administrator or complete a short loan form... the interest rate, set by the plan, will be relatively low -- usually a couple of points above the prime rate, currently 6% (this is low compared with credit card rates, which can be up to 25%). The interest you pay goes back into the account.
Disadvantages: The money borrowed diminishes what could be saved for retirement... if you leave the company before repaying the loan, you must pay it back -- any outstanding balance will otherwise be treated as a taxable distribution (and subject to a 10% penalty if you're under age 59½).
4. Tap your IRA. Pledging an IRA as collateral for a loan or "borrowing" from it is treated as a taxable distribution (subject to a 10% penalty if you're under age 59½). But you can use money from your IRA for 60 days, tax and penalty free.
Big danger: You must replace (redeposit) the money in any of your IRA accounts within 60 days, or pay tax on it. Whatever isn't put back becomes taxable as ordinary income.
Caution: You can make only one such withdrawal/redeposit, called a rollover, within a one-year period.
5. Borrow against your life insurance policy. If you have a cash-value life insurance policy (whole or universal life), you can borrow against the amount accumulated in your account. Just call your insurance agent or insurance company to receive a check within 48 hours to two weeks.
Borrowing limit: The cash value in the policy.
In today's market, the annual interest rate on such a loan is about 7%, but many companies will reduce the dividends they credit to your account for as long as you have the loan -- in effect, upping the interest rate. Usually, you can repay funds when and to the extent you choose, but if payments don't at least cover interest, the cash value of your policy continues to be further depleted because the interest not paid is subtracted from the cash value.
6. Use a margin account. Margin borrowing allows you to leverage securities you hold at a brokerage firm to access a convenient line of credit -- using checks issued by the firm to access your line or by receiving a broker's check (often the same day you ask for it). You can even have the funds wired to your bank account. All you need to do for this kind of borrowing is sign a margin account agreement.
Limit: 50% of the current market value of a stock... 90% for Treasury and agency bonds... 70% for corporate bonds... and 60% for municipal bonds. Some securities (e.g., equities trading below $3 a share) are excluded.
Interest rates, which are based on the broker call rate (the broker's cost of money), vary and the more you borrow, the lower the interest rate.
Example: Fidelity's rate for borrowing less than $10,000 is currently 11.075%, but borrowing $500,000 or more has a 6% rate.
Note: Interest on margin accounts may be tax deductible as investment interest by those who itemize deductions. You must use the money to buy or carry investments, and you must have investment income at least equal to the investment interest. You must also not be borrowing against tax-exempt securities.
Caution: If the value of the securities falls below a certain level while your loan is outstanding, you'll get a margin call -- a demand from a broker to provide money or securities to bring the value of the account back to the required level. You'll have to sell some of your holdings to cover the shortfall if you don't find other money to pay down the margin debt.
7. Get a home-equity line of credit (HELOC). Your bank will approve you for a specific amount of credit. Many lenders set the limit on a HELOC by taking a percentage of a home's appraised value and subtracting the balance on the existing mortgage, if any. The process can take a week or more to arrange, but once the line is in place, you can write checks against it.
HELOCs typically use variable interest rates based on the prime rate (current HELOC rates are around 7.5%). Look for a lender that will waive all costs of establishing the loan, such as an application fee, an appraisal fee and closing costs.

8. Take a cash advance from a credit card.
Drawbacks: Very high interest rates -- rates for advances typically range from 20% to 25%, in contrast to the average rate on credit card purchases of around 16% to 17%. In addition, cash advances usually carry an up-front fee of 2% to 4% of the amount advanced.
9. Borrow from a pawnshop. Pawnshops are in the business of making short-term, small-money loans, with personal items used as collateral. A pawnbroker will appraise your jewelry, small appliances, musical instruments or other items and typically lend 50% of the retail value. Interest rates and fees for these loans are state regulated, but the term of the loan is usually 30 days to several months and the fees are generally high.
Example: New York pawnbrokers have a collateral loan period of four months, and the interest rate is 4% a month, which means an annual percentage rate (APR) of 48%. There may also be a service charge -- the maximum charge for loans between $50 and $100 is $3 (loans above $100 are $5). If you don't pay back on time, your collateral can be sold.
10. Take a "payday" loan. If your employer won't give you a wage advance, consider a payday or "fast cash" loan.
These loans (offered at payday loan stores and at such sites as, and are popular because they're easy and quick to arrange -- you can get funds in as little as one hour.
These loans don't require a credit check -- they're based on just a few criteria, such as the applicant's monthly wages (usually a minimum of $1,000). The maximum loan amount is between $500 and $1,500, and the loans are for short periods, usually one to four weeks.
These loans are pricey -- finance costs (fees) run from $25 to $45, regardless of the size of the loan. Sounds reasonable? It's not. Charging $45 for a two-week loan is the equivalent of $1,170 for a year. If you borrowed $300, that's an APR of 390%!

Bottom Line/Retirement interviewed Madeline Noveck, CFP, president, Novos Planning Associates, Inc., a financial planning and investment company, 28 W. 44 St., New York City 10036, and a past president of the Institute of Certified Financial Planners (now the Financial Planning Association).

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