Evaluating Your Investments: Income- Focused Investments

Someone once asked my why I invested in a particular thing. My answer? "To make money, of course". That answer was the truth but the point of the question was that there is no perfect investment; they all have strengths and weaknesses and when evaluating a new investment or deciding how to allocate your money among investments you have, you have to consider the strengths and weaknesses of each type of investment.  This article will focus on investments that people buy for income--for money paid to them now, whether that money is to be used now or reinvested for future use.

Types of Accounts

First we need to quickly look at the basic types of investment accounts.  Most types of investments can be held in any of these types of accounts.  Which you pick depends on your current and future needs.

Normal Accounts

These are opened by default; the others must be chosen.  Income from normal accounts is taxed yearly.  While the custodian of the account may have rules governing withdrawals, the government does  not. The advantage of these accounts is that you can get your money when you want it.  The disadvantage is that you can get your money when you want it--and that you have to pay taxes yearly.

Used with permission of 401kcalculator.org

Roth IRA

Once money is placed in a Roth IRA you will never pay taxes again on it again or on the money it earns.  However, contributions are not tax-deductible when made.   What's more, you can withdraw your contributions (but not your earnings) at any time without penalty.  Some people use Roth IRAs to save for medium-term goals; they withdraw principal when needed but the earnings stay to grow, and grow tax-free.  Another feature of the Roth IRA is that you never have to withdraw money from it; the account, and its tax-free status, can be passed on to your heirs.

IRA or 401K

You do not pay taxes on money you put into these accounts.  However, unless you are over 59.5  years, you pay penalties if you withdraw money.  Also, you have to pay income taxes on any money withdrawn from your IRA or 401K.  Finally, the law requires people over 70 to take minimum distributions from their IRA or 401K, based on age/life expectancy.  

Types of Investments

This article focuses on investments people hold for the income they generate.  

Bank Accounts

Description:  Very simple. Take your money to the bank and deposit it. They agree to pay you very little interest but your account is insured by the government and except for certificates of deposit, you can access your money at any time without penalty.  

Liquidity:  Bank accounts can be accessed at any time.  

Stability:  The value of bank accounts is predictable and they are insured by the government so you know they will not lose value.

Growth Potential: After taxes, bank account earnings do not keep up with inflation, much less exceed it. 

Taxes:  Interest on bank accounts is taxed as regular income.

Conclusion:  Bank accounts are for money you may need to access on short notice, or which you have a specific plan to sell in the next year or two.

From Wikimedia Commons

Bonds

Description:  Bonds are debt instruments issued by corporations or governmental entities.  When you buy a bond, you are lending money to that entity.  In return the entity agrees to pay you interest, usually yearly. and to return the principal at the end of the term of the bond.  Generally speaking the more financially stable the issuer is, the lower the interest rate.  Generally speaking, the longer the term of the bond, the higher the interest rate.  

Liquidity:  Bonds can generally be sold relatively quickly (unless the entity that issued them is having financial trouble), but you may not receive full value for them. 

Stability:  It depends on the bond.  Generally speaking, as long as the issuer is able to make the payments, the bond will be worth at least what you paid for it, if you hold it to maturity.  If interest rates drop during the life of the bond, you could sell the bond for more than you paid for it; if interest rates increase during the life of the bond, the price of the bond, if you try to sell it, will decrease.  

Growth Potential: A bond's interest rate is set at the time it is issued.  If the issuer is financially viable, the interest will be paid.  The only growth is the income, plus any increase in value, if you choose to sell, if interest rates on newly issued bonds are less than the interest rate on your bond.

Taxes:  Some bonds issued by government authorities offer tax-free income.  Corporate bond interest is taxed as regular income.

Conclusion:  Bonds are a good source of income, and if high-grade bonds are chosen, chances are very good that they will not lose value if held to maturity.

From Wikimedia

Bond Funds

Description:  Bond funds are mutual funds that invest in bonds.  A mutual fund means that a financial manager pools your money with the money of millions of other people and invests it in a way consistent with the stated goals and means of the fund, with the hope of making money. 

Liquidity:  Bond funds  can generally be sold the same day you request. 

Stability:  While the share price of bond funds does not vary as much as the share price of stock funds, there is some price variability.  When interest rates rise, the per-share price of your bond fund will fall; when interest rates fall, the per-share price of your bond fund will increase.  As with bonds themselves, funds that buy short-term bonds tend to pay less than those that buy long-term bonds, but the share price of short-term bond funds does not tend to go up and down as much as the share price of funds that hold longer-term bonds.  

Taxes:  Some bonds funds hold  bonds issued by government authorities and they offer at least some tax-free income.  Interest from funds that hold corporate bonds is taxed as regular income.

Conclusion:  Bonds Funds are a good source of income, for those who can tolerate a little volatility.  

Money Market Funds

Description:  Money market funds invest in very short-term financial instruments, some as short as overnight.

Liquidity:  They can be sold the same day you request.

Stability:  Money market funds seek to maintain a stable share price, and most sell for $1.00 per share.  

Growth Potential:  These will likely lose money after inflation.

Taxes:  You can buy either tax-free funds or taxable funds.  Taxable funds, in general, pay more interest, but those in high tax brackets may do better with tax-free funds.

Conclusion:  Since these are insured, you have to decide whether the additional interest over a bank account is worth it.  A lot of people use money market accounts with their broker as a place to hold money in between investments.

Peer Lending

Description:  Peer to Peer Lending means making unsecured personal loans to individuals who want to borrow money.  Rather than lending a lot of money to one person, the two major platforms, Lending Club and Prosper, allow you to pool your money with other lenders so that you fund parts of loans to many people.  As a lender, you are paid monthly by the borrower until the loan is paid.  

Liquidity:  Lending Club notes can be sold at any time, except when payments are pending.  Propser notes can be sold only if current.  Whether you get face value (or above or below it) depends on how much you want to sell it.  Generally speaking high-interest notes with a good payment record can be sold for more than face value; low interest notes or notes with poor payment histories generally sell for less than face value.  It is a supply and demand system--you can ask whatever price you want; the question is at what price you will find a buyer and the more/sooner you want to sell, the lower your asking price.  While emptying your account may take a couple of weeks, remember that each note pays principal and interest monthly, and that they can be paid off by the borrower at any time.  Last month, the payments I received totalled about 5% of my account.  While I reinvested them, I could have chosen to withdraw them if I needed the money.

Stability:  Lending Club says that if you hold at least 100 notes and no note is more than 1% of your account, then according to their historical statistics, you have less than a 1% chance of losing money.  See charts here.  Nevertheless, defaults are to be expected and your return will not be stable over time.  However, according to Lending Club statistics, for an account of over 100 notes, you will have a hard time, over the long term, earning less than 5% or more than 9%.  

Growth Potential: While it is possible to sell well-performing notes above par value, you then lose  your source of income.  The only real growth with this investment is via compound interest, and that's not insignificant when interest rates are close to 8%.  

Taxes:  Unless held in an IRA, interest on Peer-to Peer notes is taxed yearly as regular interest income.  

Conclusion:  Peer to Peer notes are a good source of current income.  While they are not guaranteed (and a certain number of defaults are to be expected) banks have been making money on unsecured personal loans for years.  Lending Club recommends that you have no more than 10% of your investable assets in Peer to Peer notes.  

Used with permission

Dividend-Paying Stocks (or stock funds)

Description:  A share of stock is a share in the ownership of the corporation.  As a co-owner, the value of your share of the company increases as the value of the company increases.  Also, the company may pay out some of its income as dividends.  Given the low interest rates today, many investors find companies that pay dividends over 2%  to be attractive sources of income.  Some such companies are Target, Mead Johnson Nutrition, AT&T, and Darden Restaurants.  

Liquidity:  Shares of stock can be sold at any time; however, if the market is down compared to when you purchased the stock, you will lose money selling.  Of course if the market is up, you'll make money.

Stability:  Stock prices are not stable.  However, if your purpose in purchasing these shares is income, as long as the shares are dropping due to the overall state of the market rather than a problem with the particular stock, then most income stocks are stable investments--stable companies that pay good dividends usually continue to be stable companies that pay good dividends.  

Growth Potential:  Generally good.  Over time, no investment class has performed as well as the stock market. With dividend stocks, you not only get the income from the dividends but also appreciation of the stock price. 

Taxes:  Dividends are taxed as regular income.  Capital gains (money earned by selling stock for more than you paid for it) are usually taxed at a lower rate.  

Real Estate Investment Trusts (REITs)

Description:  REITs pool investor's money and invest in real estate.  The laws under which they are organized require them to pay out 90% of their income as dividends. 

Liquidity:  Shares of  can be sold at any time; but like many other investments, the price you get may not be the price you paid.

Stability:  REITs invest in real estate; therefore they are as stable as the real estate in which they invest.  They are also not closely correlated with the stock market so it can lend stability to your overall portfolio.  

Growth Potential:  If the price of real estate increases, the share prices may go up, giving you growth.

Taxes:  Dividends are taxed as regular income.  Capital gains (money earned by selling stock for more than you paid for it) are usually taxed at a lower rate.  

Conclusion

The general rule in investing is that the higher the risk, the higher the reward.  The lower the risk, the lower the reward.  Bank accounts and government bonds have low rewards, but you know the money will be there when you need it.  On the other end of the spectrum are dividend stocks and REITs.  As with all investing, playing it too safe may mean not getting the growth you need, but no safety net means you could be really hurt if things do not go your way.

How do you invest for income?

*Part of Financially Savvy Saturdays on brokeGIRLrich, A Disease Called Debt and The Frugal Cottage*

Preparing for Death

Most of us don't like to think about it, but the reality is that all of us are going to die someday.  Hopefully we will leave behind a large number of people who will miss us.  What we do not want to do is make the process any harder on ourselves or our loved ones than it has to be.  Like many other things in life, a little preparation can go a long way towards easing burdens, and when you are terminally ill is not usually the best time to start those preparations.

Prepare Yourself

Think about what you want

It is one thing to say "I don't want to die in the hospital hooked up to a bunch of machines" and yet another to decide what you DO want.  The younger you are the greater the possibility that if you die in the near future it will be via sudden accident rather than lingering illness.  Still, you need to consider some "what if's" and talk to your doctor and your next-of-kin about them.  Do you want to exhaust every effort to keep you alive, or are you ready to go?  Would you rather die at home, or someplace away from where your children are?  These decisions may never have to be made, and what you would choose today may be different from what you would choose later in life, but giving your loved ones some guidance now, before death is on the immediate horizon can help make the decisions when they have to be made.  

Think about your spiritual beliefs

While there are some people who are avowed atheists, many of us profess religious beliefs of one sort or another.  While deathbed conversions or confessions make good movie scenes, when I'm on my deathbed I do not want to fear what is to come.  Live your life today in accordance with what you believe about the hereafter.

Live your life fully

There is a country song about living like you are dying, in which the man who was told he was dying went "sky diving, Rocky Mountain climbing and 4.7 seconds on a bull named Foo Man Choo".  Unfortunately, by the time most of us realize we are indeed dying, it is too late to do those things.  As another old saying goes, "No one laying on their deathbed wishes they had spent more time at work".  While we have to think about the future, don't put off living until....because until may never come.

Prepare Your Family

Death is a tough subject to discuss, but failing to discuss it doesn't keep it from happening.  If you have minor children, who do you want to raise them if you and their other parent are unable to do so?  Have you spoken to that person?  Named them in your will?  Have you and your spouse discussed end-of-life care and your wishes about it?  Is there dissension in your family that is likely to cause trouble if you die?

If death is on the near horizon, tell your family what you want.  Do you want to be as conscious as possible or as pain free as possible?  Do you want to fight to the bitter end or throw in the towel and hook up the morphine?  You may even want to plan your own funeral. 

Prepare Your Affairs

Have the proper documentation prepared

At a minimum, this means most people need a will.  If you are single with no children, and you know the laws of intestate succession in your state (what happens to your property if you die without a will) and are happy with that distribution, you may think you are fine without a will--and the fact of the matter is, it won't make any difference to you because you will be gone.  However, it is amazing the fights some families can get into over seemingly stupid things regarding inheritances, and I can tell you right now who wins such fights--the lawyers.  

Besides your will, you need to consider a Durable Power of Attorney (document that allows the person you choose to act as your legal representative if you become incapacitated), a Medical Power of Attorney (allows the person  you choose to make medical decisions for you if you can't) and a Living Will (spells out your wishes about end-of-life care.  If you do not have these documents and get to a point where you cannot make decisions for yourself, someone will have do do it.  The person chosen then may not be the person you would choose.  Also, if there are disagreements in the family about what to do, ending up in court becomes more likely.  Documents you may need include a Special Needs Trust if you have a handicapped family member.  

Make Lists

Document your assets and let someone you trust know where the records are kept.  Somewhere known to you and known to your executor, you need to have a list of all financial accounts, along with passwords, if needed. Also, list your real property as well as any movable assets of substantial value (cars, furs, jewelery, good electronics for example).  For most of us, most of our property comes under the category of "used furniture" which we all know has little value (but is expensive to replace).  If you have life insurance or annuities that should be on this list as should any retirment plans.  Do you have a facebook account?  Can anyone access it?  What do you want done with it?  Who should be notified of your death?  

Make Money Available ASAP

Just because you die doesn't mean your bills will immediately stop, particularly if you die young.  Try to arrange things so that somone has access to some of your money quickly, particularly if there are employees to pay.  This can be done via  a joint bank accout or a "payable on death" account.  This gives someone the ability to pay urgent bills even before the will is probated.  

Consider What Would Happen to Your Business

If you own your own business, consider the value that business would have if you didn't show up tomorrow.  If you are the sole owner and sole employee and the business basically sells your labor, then the only succession plan you need is that your family needs to know how to shut the business down.  On the other hand, if you have employees and believe the business has value as on ongoing entity, then think about what you would want to happen to it if you dropped dead tomorrow--and then get a lawyer to draw up papers that make your wishes a reality.  

Conclusion

Death is going to happen; be ready when it does.

*Part of Financially Savvy Saturdays on brokeGIRLrich, A Disease Called Debt and Femme Frugality*

Life Insurance

Photo complimets of Stock Monkeys.com

One group of important financial decisions every person and/or family have to make deal with insurance--how much of what kind do we need, and what kind do little other than make the agent wealthy?  Too little insurance can leave your family finanically devastated if bad things happen; too much means you spend money to buy something  you do not need.  This begins a series of posts on types of insurance you should consider (and note that I said "consider", not "buy").  As with most other things in life, not everyone needs everything.  You need to look at your life and your needs to decide how much of what type of insurance to purchase.

Life Insurance:

The purpose of any insurance is to protect you from unexpected happenings that could financially devastate you or your family.  You are making a bet with an insurance company.  They bet that the bad thing doesn't happen; you bet that it does.  They know the odds and if they pay out more in claims than they collect in premiums, they go broke.  Most people pay far more in premiums than they will collect in benefits.  With that in mind, remember that death is not unexpected--all of us are going to die one day.  However, we generally expect to die when we are old and when people no longer depend on us financially.  The purpose of life insurance is not to leave money to your heirs; it is to protect your family against the loss of your income or services.  That is important to keep in mind when you consider the two basic types of life insurance.

Term Insurance:

Term life insurance is pure protection. If you have $1 million in term life insurance in force when you die, your benificiary  gets $1 million dollars.  Once the policy expires, when you die, no one gets anything.

Because of that, if the insurance company believes you have a 1% chance of dying this year, they need to charge you 1% of your policy value, plus a little extra for administration and profit in premium.  In other words, at that rate, $1 million in life insurance would cost you $10,000 plus profit and administration this year.

Term polices are generally quoted for a set number of years from the initial purchase date.  They can be level term which charge the same amount per year throughout the term of the policy or the premium can change at intervals throughout the life of the policy.  Most allow the policy to be extended past the end date but allow the company to set the rate after that date.

Put simply, most people's chance of dying in a given year increases each year.  A policy in which rates increase each year is generally cheaper on the front end; one in which rates remain stable over time is cheaper on the back end.  No term policies are affordable for those who are elderly or for those who have serious health problems at the time the policy is purchased or priced..

Whole Life Insurance

Whole life insurance is part protection, part investment.  While term insurance is designed to be dropped at some point in life (after the kids are grown, after the investments reach a certain point, after the house is paid for...), whole life is designed to be a permanent part of the insured's portfolio.

The insurance company agrees to pay the face value of the policy when the insured dies.  Since they know that date is coming, and since the plan is that the policy will be in effect at that time, the insurance company has to charge more.  Using the example above, not only does the insurance company have to charge $10,000 to cover the chance of you dying this year, they also need to put some money away to use to supplement the premiums when you get older--when you are 95 and have about a 50% chance of dying in the next year, they are only going to charge you the same $10,000 they charged when you took out the policy.

They do this by utilizing an approach known as "cash value".  Imagine your life insurance as two buckets.  Each year you pay the same premium.  The insurance company takes the amount needed to insure your life and puts that in the "insurance" bucket.  The rest they put in the "cash value" bucket and invest it.

Using the example above, $10,000 of the first year's premium would buy the protection and the additional money (which is a substantial amount) goes to "cash value". If you die that year, your benificiaries will receive $1 million, most of which is protection.  The next year, that premium does not buy as much protection because your chance of dying has increased.  The way the company is able to pay out $1 million if you die is because they have the cash value.  If you die in year two, the payout is still $1 million, but less of it is protection and more of it is cash value.  By the time you reach old age, your yearly premiums are buying very little protection but you have a large amount of cash value built up--cash value that isn't really insurance but rather is a savings account held by your insurance company.  

For some people the forced savings aspect of whole life insurance is worth the cost.  However, most young families need a lot of life insurance and most cannot afford a lot of whole life insurance.  Term allows them to get the protection they need at a more affordable cost.

How Much to Buy, What Kind and Why?

A good insurance agent should give you several options and be able to explain the advantages and disadvanates of each.  I'm not an insurance agent; I'm a consumer who has done some research.  What is right for me and my family may not be right for you.  However, I'm not earning a commission selling you insurance.

First, you need to figure out why you need life insurance.  If you are single with no dependants, you probably don't need life insurance.  Hopefully lots of people would be sad if you died, but who would be financially hurt?  If you can't name anyone, then the only reason to buy life insurance at that time is to protect your ability to buy a low-cost product, in case something happens to you health-wise to make that impossible at such time as you acquire dependents.  In essence what you are doing in that case is insuring your ability to have life insurance, and in my opinion, there are few instances where that makes financial sense.  

Secondly you need to determine how much life insurance you need.  There are all sorts of calculators, rules of thumb and other guides that you can find online.  The bottom line is that this money will be there to provide for your family if you die.  It comes at the cost of money you could be spending or investing today.  What is the right balance?  It is hard to say and depends on the ages of the children, the current employment status of your spouse, and the amount your spouse could earn if necessary.  What other sources of money are available?  For example, if you die young, will your family inherit from  your parents?  Do you want the kids in private school?  Are you deeply in debt, or do you have a high net worth compared to your lifestyle?  Price policies at several different levels and figure out what will meet the goals you have for your family.  

Third, decide whether to buy term insurance, whole life or some combination thereof.  Most people who are not life insurance agents will tell you to "Buy term and invest the difference".  Term insurance, as noted above, is pure protection and is the least expensive way to get the coverage you need.  Life insurance agents offer a variety of products which offer characteristics of insurance and investments and there may be times when using whole life insurance is to somone's advantage.  Listen to the agent, remember that he gets more commission on whole life products and research the other alternatives.  However, you have to remember the "invest the difference" part of the equation if you expect there to be money available in your old age.  

Fourth, you need to research the financial viability of the insurance company you are considering.  You are entering into a contract that you hope will be long-lasting.  Saving a few dollars in premiums will not do you any good if the company is not able to pay your claim.  

Finally, do not consider this decision cast in stone.  Re-evaluate your insurance needs every year or two to determine if you have enough insurance, whether you need more, or whether you can lower the amount you have.

Also, especially if you are in good health, shop around for new coverage every year or two.  Policies are priced when you buy them; if your health is better than average years later you may be able to save a substantial amount by changing policies.

We were able to double our coverage recently without increasing premiums.  The old policies had been purchased when our older children were young, and they began with low premiums.  We knew the premiums would go up in later years, but also figured that the kids would be on their own soon.

Having our youngest increased the lenghth of time for which we would need life insurance and since our health was good shopping for a new policy allowed us to save money.  Had we had health problems, we would have been able to maintain the original policies at the prices originally quoted.  The main thing to remember in this type of circumstance is to find out if there is any reduced payout on the new policy while it is new, and if so, how much and for how long.  If it is worth carrying life insurance it is worth making sure it will be there if needed.  

*Part of Financially Savvy Saturdays on brokeGIRLrich, A Disease Called Debt and Femme Frugality*

Kickfurther Update

Last week I described my investments with Kickfurther and the bottom line was that many payments did not come in as scheduled last week.  It is now Wednesday evening; there have been two full workdays after the Labor Day holiday so I assume (and yes, I know what they say about assuming) that things that were processing at the end of the week have finished doing so.   Here is where things stand with the late payments:

Marlie Madison:  Marlie Madison is a suburban Dallas boutique.  They promised 11% after six months.  The first three payments were just short of where they needed to be for a linear payout; this fourth payment was quite a bit short.  The owner has predicted she'll be back on track by the middle of October,

Clarisea offered 8% after three months.   They were supposed to make one payment, which was due September 1.  That payment came in today, in full.  Annualized, the return on this investment was over 30%.  It is sweet when it works.  

Max-Axe Guitar is supposed to pay 5% after three months.  Their first payment was due nine days ago. There has been no response on the comment board.  I'm not feeling the love here.

The Shrine sells duffel bags.  Their offer was 10% after six months. They said they had technical issues submitting their payment, but the amount was right where it should be for a linear payoff.  

Jersey Kids:  Jersey Kids offered 4% after 2.3 months, Their timeline calls for two payments.  They too claimed technical problems, but the payment was one-half of the total due, so all is well now.

Conclusion

When you are working with new businesses, I guess some rough spots are to be expected--and I'm talking about Kickfurther as well as the businesses we are funding.  One thing I will say is that the company runs a reditt board where the company officers do respond to investor's concerns and suggestions and even solict suggestions.  At this point I'd say Kickfurther has promise, but like most new companies, it is a place for money you can afford to lose.  On the other hand, when these deals work, the payoff, percentage-wise, is very good.  If you'd like to invest, please use this link; you'll get $5.00 and I get a reward as well.  Supporting bloggers is a good thing.  
*Part of Financially Savvy Saturdays on brokeGIRLrich, A Disease Called Debt and Femme Frugality*

So How Is Kickfurther Working for Me?

I've written a couple of posts on a new investment platform I discovered, Kickfurther, which crowd funds inventory for small businesses, and decided to update you on my results with it.  I started writing this post a week ago, figuring I'd fill in the amounts as they came in, as I was supposed to get six payments on Sunday, Monday and Tuesday.  It is now Friday at lunchtime and I haven't gotten anything.  

What is Kickfurther?  If your local widget seller wants to buy a truckload of them to sell at Christmas but does not have the cash in hand to buy them  s/he can ask Kickfurther investors to fund them  After deciding what return the investors should get, and after being checked out by Kickfurther to make sure it is reasonable for that business to buy that number of widgets and to expect to sell them within the time the business says it will, the offer goes live on Kickfurther.com.  At that point, I, as an investor look at it and decide if I think it is worthwhile.  I don't get paid until the inventory sells, so I look for a product that looks saleable, a good return rate and a relatively low "PSR", mean percent of the product that must be sold to make me whole.  Once the company starts selling the widgets they make monthly payments based on the number of widgets sold. If they sell them all in the first month, I get paid quickly.  If it takes longer than expected, I have to wait.  The amount returned is a flat percentage agreed to ahead of time.  Kickfurther (actually the investors, Kickfurther is the agent) owns the product, not the vendor, so if sales do not happen, Kickfurther can repossess the property and sell it through other channels.

So, how is it working for me?  Right now I have a little over $1400 invested.  I have backed twenty-nine different products.  Most of them are still in the phase between funding and payment; however these have started the payback process:

Amara Swimwear  Using a strictly linear payback schedule, Amara should have re-paid 33% of the backer's money.  They are at 27%.  The backers are supposed to make 10% over six months. You can look at some more of their suits, and buy them in my Kickfurther store. 

North Coast Organics: North Coast promised 8% after four months. Were they ever wrong; they paid everything back after 2.5 months. That's right, I earned 8% on my invested money and they only had it for 2.5 months.

Humanoid Wakeboard:  I was supposed to receive an 8% return after three months.  That hasn't happened.  What was supposed to be the final payment brought the payback to 60%.  The company says sales are improving, so hopefully we'll get the rest of the money soon.  I think it is too early to consider this a loss; it just isn't quite the gain we investors wanted.  Just as North Coast Organics didn't pay us any less when they paid back early, Humanoid Wakeboard isn't obligated to pay us more because sales were not where they hoped.  If they have not paid for the boots thirty days after the end of the projected sales period, the investors will be polled on how to deal with the situation.   You can buy these in my Kickfurther store too.

Marlie Madison:  Marlie Madison is a suburban Dallas boutique.  They promised 11% after six months.  So far their payments have been just short of where they need to be.  The owner has pointed out that summer is brutal in retail and I'm pretty sure we'll get paid eventually.  However at this point she is five days late on her payment for the month.

Clarisea offered 8% after three months.   They were supposed to make one payment, which was due September 1.  Instead we got a note from the owner saying that she was expecting to pay us next week.  She said she'd had to shut the business down temporarily due to having a kidney transplant.  Their products are available in my Kickfurther Store.  

Jersey Kids:  While Jersey Kids only offered 4% after 2.3 months, I thought it was worth it because the company appeared to be established and I figured the products would sell.  They were supposed to have two payouts and the first was due four days ago.  While nothing has been posted to my account, there is a message board where investors can communicate with the companies, and the company responded that the payment was sent in timely.  There is a subreddit about Kickfurther and there was a post there leading one to believe the Kickfurther people were out of the office this week.  Perhaps this is just a posting delay.  

Allergease reminded us that Kickfurther businesses are generally those that cannot get conventional bank financing.  Something happened after the offer was funded, after investor's credit cards were charged, and Allergease decided not to go forward with production.  I did not earn any money on this, despite the fact that they had my money for about three weeks.  I'm glad I did not lose any money on this deal.  

Max-Axe Guitar is supposed to pay 5% after three months.  Their first payment was due four days ago. There has been no response on the comment board.   You can buy from their website. 

The Shrine sells duffel bags.  Their offer was 10% after six months.  Their first payment was due three days ago and they have five more scheduled payments.  On the message board they said they thought Kickfurther would automatically draw the money from their account.  They have learned that is not the way it works and have sent the money and will be timely next month.  

I have more payments due next week, and most seem clustered at the beginning and end of the month. Also, when offers are put on the site, they have a completion date.  If they are not funded by that date, they are taken down.  If they are funded before that date, there is a longer time before the first payment during which your money is invested.  For example, Harvey Prince, maker of this

offered 8% after 4.5 months.  However the offer went live August 27 and was funded on August 28, at which time backers' credit cards were charged.  However, the end date, the date from which the 4.5 months is computed, does not start until September 12.  

So, what do I think? I've read that the Kickfurther platform is "in Beta"; they are still working out the kinks.  It looks like some of those "late" payments are just kinks.  The real question is what rate of return can reasonably be expected and maintained.  The platform hasn't been in existence long enough to get a real handle on what loss rates can be expected.  Yes, investors own the inventory and can try to sell it ourselves, but I wonder how Kickfurther plans on selling this stuff if the vendors can't.  Some losses seem inevitable though this seems more secure than Lending Club or Prosper.  I plan to continue to re-invest the payments I receive and I plan to gradually add money to the platform.  Right now there seem to be more businesses wanting money than investors willing to put it up.  However small requests, particularly if high rates are offered, go quickly.  If you would like to invest in products through Kickfurther, if you click on the affilliate links throughtout this article, you will be given a $5.00 bonus.  Since the minimum investment is $20.00, it gives you a good chance of a good return on the first product.  The drop in the stock market this week should remind all of us that having some alternative investments (and you'll have to decide for yourself whether this is the alternative investment for you; I am not a finanical expert and don't claim to be) can get us through periods when the stock market drops.   If you are a business owner and want to explore financing your inventory through Kickfurther, please click here and I get a referral fee.  

*Part of Financially Savvy Saturdays on brokeGIRLrich, A Disease Called Debt and She Picks Up Pennies*