The #1 Reason I Will Never Join An MLM is Because I Am Good At Math

I’m a big advocate of developing multiple sources of income. I’ve never worked only one job or relied on one source to generate money for me to spend. Whether working multiple hourly jobs or investing in dividend-paying stocks, my focus is always getting more money into my bank account each month.

Naturally my entrepreneurial nature has made me an attractive target for multi-level marketing (MLM) schemes.

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source: Is Network Marketing a business opportunity or a scam?

But on the other hand, the strategy of MLMs is “ask everybody” so I’m actually not that special.

I’ve written before about how Amway is the ultimate cult when it comes to pyramid schemes (the post still gets new comments on a regular basis, much to my amusement). Most others I come across have been less threatening. For example, I get invited to Passion Parties to celebrate stagettes or birthday parties at least once per year (I even hosted one for my own 27th birthday party). It’s hilarious that sex toy sales are the least naughty of all the MLMs — passion parties are fun, low-pressure environments where everyone is drinking and thus more likely to spend, and the products are high priced. I don’t know what the payout is, but there are worse ways to spend 2hrs of your time than pushing dildos over cocktails. (/sentences I never thought I’d write)

In the past week I’ve been approached by Mary Kay (twice!) and Arbonne representatives. In the past I’ve also been invited to Scentsy parties, though I haven’t attended (more because of scheduling conflicts, because I’m certainly open to going and receptive to buying!). It was only because I was pushed again to review the “potential” as an Arbonne consultant after previously declining that I took a look at the numbers. This is what I found:

You get a 35% profit on all the sales you make.

If your first thought was “wow over 1/3 profit for every sale! That’s not bad!” (I was told this is one of the “highest for MLMs”) you better check your math:

You’d need to sell $100,000 of makeup to scratch out $35,000.

I’ll tell you what kids, I know about 35,000 easier ways to net $35,000 than hawking mascara and blush. Don’t get me wrong, I have purchased and used Mary Kay and Arbonne products in the past and they are lovely. It is legitimately very nice cosmetics and body products. You are NOT being scammed by being sold or selling a cheap or bad product, but that doesn’t make this a good idea. However, there are some major downsides here:

When you join MLMs, you often need to pay out of pocket for things like…

  • Your annual consultant registration fees
  • Attending business conferences
  • Transportation costs to get you to and from parties or sales
  • Your unsold product

Maybe the goal isn’t $35,000 but less like $5,000 or $10,000 which would only require you to sell $15,000 to $30,000 of make up. Still, I feel like asking me to sell over $1,000/mo of makeup is asking a lot. Where am I going to find people willing to buy over $200 of products from me every week? As someone who’s pared her daily makeup down to mascara-only, this number strikes me as absurd.

But this is because joining an MLM is NOT about selling a product,

it’s about getting more people on your “team”.

The more friends and acquaintances you convince to take part in your “business opportunity”, the higher your monthly income goes. You profit by their membership fees and from their sales. The only real way to succeed in an MLM is to immediately recruit a powerhouse team of ambitious sales rockstars that can both push product and get others on board. If you only manage to recruit a handful or less of lukewarm friends, you’re never going to make money.

 You should devote your entrepreneurial efforts to basically anything else. 

Because pretty much anything else will be infinitely more profitable.

Unsure of how to bring in extra income with less work than being part of an MLM? Look for endeavours that utilize unique skills and have low startup costs such as:

  • Tutoring an academic subject
  • Teaching a language or instrument
  • Making a product and selling it on Etsy
  • Monetizing a hobby, like photography or blogging
  • Purchasing and reselling collectors items
  • Completing odd jobs

In short, there’s no real easy way to make tons of extra money, but there are easier ways than MLMs.

The $5 Task To Boost Your Professional Network

Sorry I don’t have a $0 weekend post for you (I’ve had one in drafts for 3 weeks now, just having a hard time finishing it up.. maybe next week!) but I recently thought of an idea that might be a benefit for those of you in school and looking for ways to build a professional network.

I’ve talked about how to maximize your LinkedIn profile before, but recently a new site has been on my radar called Ten Thousand Coffees. The mission of Ten Thousand Coffees is to “unlock opportunity” by providing the starting point to begin a conversation. While I love LinkedIn for connecting with professionals I already know offline, there’s no way to really get to know someone outside your network without stretching yourself through an awkward introduction.

What if you could know which professionals were open to meeting with you, even if you weren’t connected to them on LinkedIn?

Ten Thousand Coffees provides exactly that platform.

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While I was browsing experts a cool idea came to mind…

Starbucks is currently running a “tweet a coffee” promotion, where you can tweet a $5 Starbucks gift card at a person. If you’re one of the first 5,000 to do so (it’s already been on for a week or two), you will get a $5 gift card for yourself — essentially providing coffee for you & a friend for $5.

Why not tweet a coffee to the professional you’re interested in meeting with for an informational interview?

Using Ten Thousand Coffees you could find out who is willing to meet up with you, and then tweeting them a coffee with a link to your Ten Thousand Coffees profile would be a cool way to invite them to chat (and treat them at the same time!).

At worst they’d decline and get a free coffee, and you’d only be out $5 (or possibly nothing, as your Starbucks account would be credited $5 if you’re one of the first 5,000 to tweet a coffee) — but it’s such a creative hilarious way to invite them to talk, I’m doubtful anyone would say no. I know I wouldn’t!

Even if you’re not bold enough to tweet a perfect stranger a Starbucks card, Ten Thousand Coffees might be a worthy site to utilize to start building your professional network.

Canadian Personal Finance Celebrity Series: Gail Vaz Oxlade

Gail Vaz-Oxlade is a Canadian personal finance author, speaker, and TV host. She has published numerous books on budgeting, saving, and investing, and I’ve always been a fan of her no-nonsense approach to financial management. You can read more from Gail on her website, or purchase her books here. Below, she answer four questions I posed about millennials and money. Read on!

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1. Most Millennials can’t afford to support themselves until their 30’s. What’s the biggest thing holding them back from independence? 

It’s hard growing up with privilege and then coming to the realization that all that good stuff costs lots’n lotsa money. I remember the first time I pointed to a pile of fire wood (we had a country home and heated with wood) and said to to then 11-year old daughter, Alex, “How much?” She didn’t have a clue. I let her guess. And guess. And guess. Wowza… big surprise. I started sharing what things cost, not to beat into her how privileged she was but to educate her on what things would cost when she took on those bills herself. This is perhaps the easiest and least taken path to raising young’uns who understand their privilege. And before people rush into, “I’m not really privileged,” I’d like to point out that if you had a roof over your head and good food in your belly, if you had at least one present on your birthday or for Christmas, if you were driven anywhere, you’re privileged. So the big thing holding Millennials back may be their expectations. What’s a roof? Is it clean and without holes or does it have to sit on 3,600 square feet of hardwood, granite and marble? What’s a good car? Does it reliably get you from point a to point b or does it have to have swag?

2. The biggest complaint from new grads is crippling student loan debt. What’s the secret to paying it off before grey hairs come in? 

Most people default to the payment the student loan system give you, sometimes even less. That’s a sure way to stay in debt for a decade or more and to pay double your cost of education. If you want to be out of debt, pick an end date, calculate the payment that will get you there and then do whatever it takes. I don’t care if you have to work two or three jobs, if you want to be debt-free, that’s how you do it.

3. 20-somethings tell me the stock market is scary — what investing tip would you give them to overcome their fears? 

Start by using an indexed investment that mirrors the market so you’re not worried about having to “stock pick.” Be prepared to stay in the market for a minimum of 15 years, so that can’t be money you’re planning to use to further your education, buy a home, or have a family. Educate yourself. Learn at least 12 new things about investing every year. Start a ‘pretend’ portfolio and watch how you do. Tweak. Learn. Get competent.

4. There’s lots of articles about what millennials are doing wrong with their money, but is there anything they are doing right with their money that we’re not giving them enough credit for? 

Millennials are extremely concerned about doing good with their money even as they’re figuring out how to live well. I applaud their social conscience. Perhaps more than any ‘young’ generation before, they understand that their own pleasure should not come at the expense of another, be it a person in a sweatshop, a critter, or Mother Earth. I think too many people of my generation have put the Mighty Dollar before those that are impacted by their desire for profit. Millennials are showing us that with careful consideration and attention to detail they will hold their suppliers accountable whether those suppliers are using the services of a worker in the third world, sourcing energy or looking for palm oil. Keep it up!

Financial Black Swans: Why Your Financial Future is Never in Your Control

Caution: Post contains Masterchef spoilers if you haven’t watched the season finale from this Monday yet!

If you’ve read “The Black Swan: The Impact of the Highly Improbable” by Nassim Nicolas Taleb, you can already guess where this post is going. For those of you that haven’t, I highly recommend it.

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It’s one of those books that will change your perception about your life — given you can get over the author’s hilarious arrogant academic overtones. I really enjoyed reading Taleb because he’s pompous, but seems obliviously so — he’s just really, really smart and it makes the rest of us normal people feel very dumb. But what is a black swan? (not the Natalie Portman ballerina version)

black swan

noun
  1. an unpredictable or unforeseen event, typically one with extreme consequences.

The concept of black swans is that the fate of something (your financial health, for example) is more likely to be determined by single extreme events rather than a series of small efforts.

This means that your financial success or failure is more likely to be determined by a major event rather than your day-to-day habits.

How is this possible? The Personal Finance community (myself included) will tell you it’s the day-to-day effort of saving, living frugally, and avoiding debt that will determine your financial health. And truly, when you examine your life daily, it will look like these are what adds up to your current net worth picture — but chances are if you accept firstly, that you genuinely have no clue whatsoever what the future holds, and secondly, examine your past with a critical eye, you’ll be able to find some black swans lurking in your financial history.

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Courtney of Masterchef going from “here” to HERE as her $250,000 Masterchef prize — a financial black swan! — swoops in and takes her out of the gentleman’s club and into a culinary career

One of the main examples Taleb uses in the book is the life of a turkey: for one thousand days, the turkey leads a normal life in its pen. It expects the following 1000 days to proceed exactly the same way, totally uneventful. Instead, it’s head gets chopped off so the bird can be eaten for Thanksgiving dinner. Drastic, unexpected, and life-altering.

Taleb even argues that the longer you go without experiencing a black swan, the more like it is that you’ll encounter one. In other words, just because nothing has happened yet is exactly why you should believe something is about to happen.

But don’t be fooled by the ominous name, not all black swans are negative — some are tremendously positive. But we have a tendency to take credit for the positive black swans in our life and claim bad luck as the culprit of the bad ones. Truthfully, you have no control over which black swans you’ll experience in your lifetime — but they’ll drastically alter your financial picture.

Positive Financial Black Swans:

  • receiving an unexpected inheritance
  • winning a lottery
  • receiving a settlement
  • getting an unexpected major promotion or job opportunity

Negative Financial Black Swans:

  • suffering a debilitating illness or disability
  • having an unplanned child
  • going through a divorce
  • getting fired or laid off from a secure job

By nature the black swans are described as “major”, but how major they really are is in context of your own life. For some people receiving an extra $10,000 is a life-changing event, for others $50,000 or $100,000 won’t make any real difference in their lifestyle. Regardless, this money can come from anywhere, whether you play online Casino games or not — it doesn’t have to be a gamble.

What are my financial black swans?

I can’t think of any off the top of my head. My first stocks doubling in the first few years I owned them, receiving a big entrance scholarship to my MBA program, creating a profitable website…  but chances are my major financial black swans haven’t arrived yet. My adult life has barely started, and more likely than not, there are some financial black swans lurking in my future worth tens of thousands dollars (possibly hundreds of thousands of dollars) that will drastically alter my financial picture — for better or for worse.

Can you protect yourself against black swans?

Yes and no. Stock and housing market ups & downs are outside your control, but a collections agency hounding to pay your debts are not. An emergency fund won’t stop you from getting laid off from your job, but it will help you cope until you find a new one. Planning for retirement isn’t necessary if you’re going to win the lottery, but you don’t actually know if you’re going to win the lottery so it’s best to err on the side of caution.

What you can do is understand that no matter what you do, you can’t plan your whole life in a spreadsheet. You need to be flexible and resilient to deal with dramatic events that drastically alter your financial picture. At any point in time, your life can be dramatically, irrevocably altered by circumstances beyond your control.

Have you been hit with any dramatic unexpected events that changed your finances for the better or worse?

September Spending Fast Mid-Month Check-In

Happy September 15th! Winter came early this year and snow has already fallen in Calgary. It’s melted for now, but I still feel like we skipped Fall entirely. Good news is I haven’t been skipping out on my spending fast, and have cut all unnecessary spending out of my budget to the absolute bare minimum. Here’s my mid-month check-in!

Total unnecessary spending in September so far:

$24.74

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Bed Bath & Beyond – bought some goodies for the apartment with a $100 gift card… but the total came to $100.74 so I had to fork over the extra seventy-four cents. Whoa, big spender.

Alcohol - my MBA program had a welcome back party at a local bar the first Saturday of the month. 1 drink ticket was not enough for me, and I ended up buying 2 glasses of wine. Maybe I shouldn’t have, but I did.

Tea – on Friday I woke up with a sore throat to rival all sore throats, but that’s no excuse for the stupid $4 tea I bought. I was just wandering around and wandered into Teavana, and after sampling one of the teas they had out, I was too weak-willed not to buy. I nearly choked when the clerk told me my tea was $4 but I didn’t know what to do — say, “that is stupidly priced, I’m not paying!” ?? — so I just paid and left. Gah. On the upside my sore throat was soothed, but I’ll be bringing tea from home this week.

Gift – I bought a coffee for my boyfriend through the Starbucks tweet-a-coffee program. It cost $5. I have no excuse for this, it just made me so sad that he had never tried a pumpkin spice latte before.

Though if a single tea was my biggest spending mistake in 15 days, I’m not going to beat myself up. Let’s be real here people.

Things I wanted but did not buy:

  • tickets to Maroon 5’s new tour
  • an Amazon Kindle
  • a rain jacket
  • rain boots
  • an umbrella
  • nailpolish
  • eyeshadow
  • sweaters
  • coffee every day
  • …. and a ton of things I’ve forgotten because I only wanted them in passing and they are completely unimportant and I’m so glad I didn’t waste money on them because I can’t even remember what they are anymore!!

I can already see the savings in my bank account by not spending everything that comes in, but I’ll wait until the end of the month to give a recap of actual extra dollars in my pocket.

It’s been hard to turn down dinners & lunches with friends, but otherwise it hasn’t been as difficult as I thought. You kind of get into a rhythm of I’m-not-spending-money-today and it becomes habit. After enjoying a decent income for the past few years, I’m happy to see returning to a super-frugal lifestyle hasn’t been as big of a pain as I expected — though I know a lot of the ease comes from the understanding that it’s 100% temporary. If there was no light at the end of the tunnel, this would be much harder.

Anyone else on a spending diet with me this month? How’s it going so far?