In today’s economic climate, obtaining start-up loans continues to be the most formidable obstacle to becoming a business owner. But, as the old adage goes, where there’s a will – or better yet, a business plan – there’s a way.

Zak started working at a commercial construction company immediately after he finished high school. Trained in the plumbing field, Zak didn’t mind the work, but he knew it was not what he wanted to do with his life.

After six years with the company, Zak got laid off at the end of 2007. He thought about changing careers, but was quickly offered a position with a small plumbing company. A year later, just as the 2008 recession started to grip the country, Zak was laid off again.

Six months after he got his second pink slip, the married father of three acted on a plan to start his own business, Davie Landscape and Lawncare, which is based in Mocksville, North Carolina. While the business climate is competitive, the company is growing and Zak loves going to work each day.

In today’s economic climate, success stories such as this are something to cheer about. (In our family, we’re especially elated, as Zak is our son-in-law.) With an unemployment rate that has stayed consistently above 9% over the past few years, you might think that a lot of job seekers who are frustrated over looking for work would be starting businesses. However, a recent report from the consulting firm Challenger, Gray & Christmas found that start-ups have dropped to the lowest level since the firm started tracking the statistic in 1986.

The reason may have to do with the fact that the biggest obstacle to starting a business is obtaining money to finance the start-up costs. Lending money for new businesses has always been risky, which leads to new owners usually taking out home-equity loans or using credit cards to obtain cash. Today, these sources of financing are difficult to access.

The good news is that help is available to better assist potential business owners make a case for themselves. For example, SCORE Lancaster is an all-volunteer, nonprofit association that provides free, expert business mentoring, how-to guides, and low-cost educational workshops and courses for people wanting to start their own businesses. The programs are also open to existing businesses that are looking for ways to improve.

SCORE Lancaster district director Jerry Glenn agrees that financing is the biggest obstacle for most people trying to start a business. Glenn says his group has mentored people who have great ideas and good business plans, but lack the funding they need. Lenders are reluctant to loan money based only on a business plan. Without collateral or a cosigner, most businesses end up staying on the drawing board.

Despite the difficult climate, SCORE Lancaster helped launch 35 new businesses in Lancaster County this past year. These new businesses created 75 new jobs.

The US Small Business Administration is also a great resource for information on starting a business. The website offers information on writing a business plan and finding a mentor. Information on small-business loans and grants that may be available to help get your business started is also provided.

The SBA does offer a variety of loan programs for very specific purposes. You should review the website to see if your business will qualify.

Starting a new business is risky. According to research conducted by the University of Texas, the survival rate is only 38% in the first four years. A chance of lasting 10 years falls to 9%.

Zak is confident that Davie Landscape and Lawncare will be one of the businesses that can break the four-year hurdle. Thus far, his business plan is working. While lawn-mowing keeps food on the table, Zak’s real interest is in the landscaping side of the business. So, in an effort to learn more about horticulture, he is taking courses at the local community college. He has been able to finance his business with a small personal-savings account. He buys used equipment and works out of his home in order to keep his expenses low. A portion of the gross income from each job is set aside to add or replace equipment. He rents specialized equipment when needed for a job so he doesn’t have to spend large sums on equipment that may not be used on a regular basis.

Thanks in part to client referrals, a website presence and social media (Facebook), his customer list is growing. Zak is also making plans to participate in trade shows as a way to further increase exposure for his company.

Getting Started

• Get Some Experience in the Field. Take a job working in your chosen field first and try a variety of positions before you try to run such a business on your own. You might just find that you don’t like the business anyway.
• Write a Business Plan. SCORE Lancaster says there is no other single process that can be more useful in business problem-solving than addressing the risks and thoughtfully forecasting them. If it doesn’t work on paper, it will not work in the real world, either.
• Line up Your Financing. Part of the business plan will forecast how much money you are going to need to get started. Make sure you know where that money is going to come from. Don’t rely on credit cards – it is the most expensive debt you can have. Friends and family may be your best source of funding. Discuss the risks up front. Set the loan up like a formal business transaction and establish a realistic payback schedule.
• Set up a Support System. You should bounce your ideas off a good sounding board. This person should have experience in running a business and be able to introduce you to others in a position to help. Or, establish a relationship with an organization such as SCORE Lancaster.

This article originally appeared in the November 2011 issue of Lancaster County magazine

The misconception for a lot of people is that real estate is an investment. Real estate does not grow in value on its own. In fact, you have to continuously put money into it just to maintain its value. The price appreciation you experience with real estate is really only the result of inflation.

I was recently speaking to a group of people planning to retire in the next five years. There were a lot of questions about investment strategy and gold in particular. Afterward, a man explained his strategy for investing in real estate. He reasoned that, with the exception of the past five years, real estate has always been a great investment. He pointed out that the currently depressed real-estate market made it an ideal time to load up on property. This gentleman was not asking my opinion on his strategy as much as he was trying to get me to confirm his foresight.

Unfortunately, real estate is not an investment. I’m not saying that money cannot be made in real estate, because developers do it all the time. However, it is very difficult for the average person to make money owning real estate. The argument that they aren’t making any more land or that eventually the price has to go up just doesn’t hold water.

My dad never owned a stock in his life. He believed owning real estate was the best investment ever (except for the 18-percent CDs he had in the early 1980s). He often talked about the property he bought in the early 1970s and how much it had appreciated.

If you hold this same opinion, let’s take a look at that great bargain back in the 1970s. The median price of a home in the United States in May 1971 was $25,500 according to the U.S. Census Bureau. Forty years later, the median price of a home in May 2011 is $222,600. That’s about a 10-fold increase, which works out to 5.6% annually. Certainly not a home run, but the appreciation is better than inflation over that period of time.

Here’s the part that most people forget – you had to continually put money into the property for it to maintain its value. What was the cost to replace the roof, paint, maintain the interior, upgrade electrical and plumbing, etc. over the past 40 years? Most real-estate professionals advise budgeting 1 to 3% of the cost of the home for annual maintenance.

Property taxes are another big annual expense that could easily shave another 1% per year off your return. There is also the cost of buying and selling real estate, and financing costs for those not able to pay cash. When all costs are figured in, the average property did not even keep pace with inflation over the last 40 years.

I also took issue with the statement that real-estate prices are currently depressed. This viewpoint relates to prices in 2007, when the real-estate bubble was at its peak, and comparing them to today. Census information shows the high median home price was $262,600 in March 2007. When compared to today’s market, it appears that today’s average price is down 15%. This would be a valid argument if home prices were fairly priced in March 2007. I believe they were extremely overpriced and that today’s home prices are now back to where they should be.

I believe that over time, the average home price will keep pace with its replacement cost, which is basically the rate of inflation. The median price of a home has risen 2.4% annually over the past 10 years, which is about the rate of inflation. Going back 20 years, the median price has risen 3.3% annually. Anyone waiting for prices to return to 2007 levels is going to have to wait awhile, because home prices are currently where they should be based on inflation.

I am not trying to say that you should never own property. In my opinion, owning property is a great idea if you are going to live in it, run your business from it or even use it for a vacation home. The biggest value for my dad over the past 40 years was not the price appreciation, but rather the fact that he lived there. Owning your home is part of the great American dream and the satisfaction that comes from home ownership is valuable, even if it is hard to quantify.

The current tax code has many significant tax advantages for the homeowner. Property taxes and mortgage interest are both deductible to taxpayers who itemize. The capital gain on your residence is tax-free up to $250,000 once you have lived in the house for two of the last five years.

Homeownership also has its disadvantages. Owning a house is usually more costly than renting. Replacing the heating system or roof entails expensive repairs that may come when you are least prepared to pay them.

If your job requires you to relocate to accept promotions, homeownership restricts your flexibility. You may also be required to move when conditions are less than ideal to sell a home.

Business ownership is the only true investment that grows. The easiest way for the average person to own multiple businesses is through the stock market. The value of your shares increases as the companies find new ways to make money and improve their manufacturing methods.

With the economy’s ebb and flow, the value of your shares will rise and fall as the outlook changes, but over time, businesses grow their earnings and their value appreciates. Obviously, not all businesses are successful, which is why diversification is important.

This article originally appeared in the October 2011 issue of Lancaster County magazine

Rick Rodgers appeared on C-SPAN’s Washington Journal on Sunday, September 25 to discuss the Pension Protection Act of 2006 on its fifth anniversary. Rick discusses how the act impacts employee pensions, or defined-benefit plans, what you can do to keep your pension secure, and how to avoid potential pitfalls in the current uncertain economy.

View Rick’s appearance on C-SPAN (click “Rick Rodgers, Author, ‘The New Three-Legged Stool’ & Retirement Counselor” in the right-hand sidebar)

“Last year, more than 100 pension plans failed.” So begins a new U.S. News & World Report article based on an interview with Rick Rodgers, where he walks through five situations where your pension could be at risk and what you can do to protect your retirement.

The five factors?

1. Your employer has gone through a merger or buyout
2. Your Social Security statement contains errors
3. You worked past age 65
4. You forget to alert your benefits officer about a life change
5. You frequently change jobs

For Rick’s advice on how to minimize these risk factors, read the full article, 5 Factors That Could Put Your Pension at Risk on USNews.com.

If you receive an annual summary of your company’s pension benefit plan and only take the time to glance at it, you could be putting your retirement security at risk. It’s important to review this summary, and even ask for more details, to catch errors early and to acquaint yourself with eligibility requirements, Rick Rodgers tells Investor’s Business Daily.

Read the full article at Investors.com »

With the stock markets down, there are three important steps you can take to protect your long-term wealth and to take advantages of opportunities that come from low stock prices. Rick shared these three tips with the news team from NBC affiliate WGAL-TV:

View the full video: Stock Market Plunge: 3 Things You Need To Know »

Catey Hill, author of the Encore retirement blog on The Wall Street Journal’s SmartMoney.com, turned to Rick Rodgers as an expert when she recently considered the question of whether parents should help their children save for retirement:

The first rule of thumb when pondering this question is to make sure to “put your own retirement savings first,” says Rick Rodgers, CFP, and author of “The New Three-Legged Stool.” In effect: If you don’t have enough saved for your own retirement, don’t start handing over your hard-earned dollars to the children.

But if you’re on track for retirement yourself, it can be personally rewarding, not to mention extraordinarily helpful to your children, to start helping them save for retirement, he says. Rodgers outlines four ways to do it…

For Rick’s four suggestions, be sure to read “Should You Save For Your Kids’ Retirement?“

Rick appeared recently on the morning show of KPHO CBS 5 in Phoenix, Arizona to discuss why many couples fight over money. He shared tips for married couples on how to avoid fighting about money and learn to complement each others’ personality when it comes to finances.

That’s the question a parent must ponder when an adult child asks for financial assistance.

One of the greatest parts of being a parent occurs when you become a grandparent. So, it is with great joy that I greeted the newest member of the family, Addison Grace, on April 12, as she made her world debut. The miracle of life will always amaze me. I marvel at the wonderful life that has yet to unfold before little Addison and the challenges she will face.

Grandparents often joke that they get to spoil their grandchildren and then leave to let the parents deal with the aftermath. I’m sure that a lot of this is meant in good fun. However, when it comes to money, there is a point when spoiling can have a long-term negative impact. My father was raised during the Depression and I remember asking him for financial help with something when I was in my teens. He told me that he wouldn’t help me because it would be robbing me of the joy of working for what I wanted. He said I would appreciate and value the things I worked for more than those that were handed to me. I thought it was a brush-off to get out of loaning me money. I learned much later how right he was.

My generation, the baby boomers, has been more prosperous than our parents. Unfortunately, a lot of us have spoiled our children and may now be spoiling our grandchildren financially. As my father said, we have robbed our children of the joy of working for the things they want. I have been doing a lot of interviews recently on the baby-boomer generation and whether they are prepared for retirement. The numbers don’t look good. According to AARP, 80 percent of boomers believe they will need to continue working after they reach age 65. Twenty-five percent said that one of the reasons they weren’t able to save enough to retire was because they were still supporting their adult children!

It is not always easy to determine when your help is really needed and when you might just be helping your child avoid financial responsibility. It is important to carefully consider the financial ramifications – not only to your own future, but what you might be doing to the person you’re intending to help. Here are some guidelines to consider when you are asked for financial help:

1. Do they have a budget?

Always ask to see their budget before you agree to help. Most likely, they won’t have one. That is probably why they are in a financial bind to begin with. Helping them put together a budget will reveal if this is a minor financial dilemma or if they have some big spending problems. They will need to get their spending under control so they can avoid being in this situation next month and be in a position to pay you back if you choose to make this a loan.

2. Are you helping or enabling?

Will this be a one-time means of financial support? Or, are you bailing out your adult child yet again from his or her overspending? It is not uncommon for someone to ask for help with a credit-card balance that has gotten out of hand. The problem is the spending, not the credit-card balance. If you help them pay down the credit card without correcting the spending problem, they’ll be back again in six months with another big credit-card balance and new excuses.

3. How will this affect you?

Do you have the money to lend in the first place? I’ve seen situations where parents have co-signed loans for their child only to get stuck making the payments. Several times, clients have asked about taking a line of credit out on their own home for their child, with the understanding that the child would make the payments. Always consider the worst-case scenario and how that would impact you. Your child may be the most financially responsible person and have every intention of making those loan payments. However, a job loss or extended illness could ruin those good intentions. What would happen to you financially if you had to pay off the loan?

4. Why are you doing this?

This is not easy to answer honestly. Do you believe you need to provide financial help to show your love for your child? Will your financial support gain more attention and/or devotion? Some people use their financial support as a way of maintaining control over their adult children’s lives. Do you believe that by giving your child money you will be able to change his or her behavior?

5. How will this affect your relationship?

Proverbs 22:7 says, “The rich rule over the poor, and the borrower is slave to the lender.” When one person owes money to another, it changes the relationship – even between parent and child. That is why I often council my clients not to make loans to their children. Make it a gift. If you can’t afford to make the gift, you probably can’t afford to make the loan, either. Don’t let money poison your family relationships.

The greatest financial help you can give your children is to teach them how to manage money responsibly. This starts with learning to live below your means and saving regularly. Put off purchases until you have the money saved so you can avoid going into debt. Start investing early and invest regularly. The road to financial independence begins with learning the basic principles of financial management and then applying them every day with every financial decision that you make.

This is the legacy you want to leave for your children and your grandchildren. As for little Addison, I’m going to spoil the heck out of her … with love.

This article orginially appeared in Lancaster County magazine.
Illustration by Scotty Reifsnyder.

Rick Rodgers appeared on the morning show today on Fox 10 in Phoenix, Arizona, with more advice for couples on handling money issues.

Disagreements About Money Hurt Marriages: MyFoxPHOENIX.com

Recently Rick Rodgers visited the television personalities of the morning show of Fox 6 in Milwaukee to share fundamental advice that can help prevent finances from putting a strain on their marriage. Statistics show that of couples who divorce, 57 percent say the primary cause was related to money, and around 90 identify money issues as a contributing factor. It doesn’t matter how much money you have, either. It’s all about habits, personal styles, and communication.

Enjoy this segment, in which Rick shares tips on how couples can learn to make good financial decisions together.