Saturday, April 30, 2016

Kickfurther: An Update and Some Suggestions

If you read this blog regularly, you know that I have been investing through Kickfurther, a platform that funds inventory for businesses.  The theory is that Kickfurther, on behalf of investors, purchases the financed inventory and gives it to the business to sell on consignment.  Investors get a rate of return that is determined when the offer is made.  Hypothetically, businesses pay back as inventory sells.  If the inventory sells more quickly than expected, investors nominal rate of return remains the same, but the length of time the money is invested is decreased, raising the real return.  Conversely, if there is a production hold-up or if the product doesn't sell as quickly as expected (or much at all) the company does not pay more interest, even though they have the investors' money for a longer period of time.  If the business is unable to sell the merchandise, Kickfurther can repossess it and sell it so that investors get at least some of their money back. That's the theory.  Kickfurther has been in operation for a little over a year now and I've been investing for most of that time.  Kickfurther has been interesting to watch, and being an investor has given me a reason to interview some of the businesses which has given me readers for this blog.  However, at this time, I can't recommend Kickfurther as an investment, though if you have some money you want to play with, I think the possibility is there for good returns.  

Problems with Kickfurther

No standard rates of return.  Kickfurther has chosen not to set standard rates of return, choosing instead to let the market do so.  A couple of months ago, the rates seemed to be set at "lower than the competition" and offers were filling within seconds.  Clearly, investors believed those offers were good investments, and just as clearly, businesses realized they could lower the return a bit and still fill.  Then, about the same time, the size of the offers began to increase as larger companies came on board, and the offered rates dropped.  Offers went unfilled, and then the offered rates started to climb again.  Then Kickfurther substantially increased the length of time offers were up on the platform before funding (or not).  This increased the amount of time investor's money was tied up in offers. As of this writing there are nine open offers on the site, with returns of more than 1% per month and less than 2% per month.  However, the offered rates seem to have nothing to do with my perception of the risk involved in the offers.  They almost seem to be "Let's run it up the flagpole and see if anyone salutes".    In my opinion, if Kickfurther wants to go mainstream and be more than a toy for those of us who like to play with our money, they need some sort of standardized rating system to make it easier for investors to compare Company A with Company B.  They also need to standardize return rates so that if Company A and Company B are about the same, they pay the same per month; if Company A is riskier, they pay more.  The rates should be backtested with the data Kickfurther has now such that someone who invested in the platform as a whole would make a reasonable (say 5-8% annualized) return after defaults.  The great unknown with Kickfurther is the average value they are able to get out of failed offers.  However, logically speaking, if a widget company can't sell widgets, what makes it likely that KF will be able to do so?  At this point, had Kickfurther not refunded my money on failed offers, I would have just broken even--and I have a couple more offers that are looking iffy right now.  Prosper tried letting investors set the rate of return and they basically bid the notes down to a point that the average investor did not make money, after accounting for defaults.  I think that if Kickfurther does not adopt standard rates, which on average will make money for the investors, investors will end up leaving, which means businesses will not be funded, which means Kickfurther will fail.

No enforcement of consignment sales concept.  Kickfuther says they are working on it, but at this time, Kickfurther has no way of monitoring sales for some of the companies.  They can monitor those who use Shopify.  If you look at the payback charts from most offers, vendors are making equal monthly payments, like a loan.  As long as they do that, investors have no reason to complain--or do we?  At least hypothetically the widgets are ours.  If the business fails, we can repossess them, and since they are ours, they are not the property of the business and can't be seized to pay other debts.  Each Kickfurther offer is subject to a revenue split.  For each sale a certain amount (but not the total price) is supposed to be paid to Kickfurther.  Some businesses have openly admitted to making sales and not sending Kickfurther its share, probably betting that enforcement of the contract would be more expensive than it is worth.  Kickfurther has recently added an attorney to its staff, and now files UCC-1 forms on all inventory.  If Kickfurther is not able to enforce the consignment agreement, then we are basically making unsecured loans to businesses which is a risky business.

No (or at least rather untested) procedures for handling defaults.  This is related to the previous issue.  Kickfurther's basic procedure when an offer is late making payments or doesn't make big enough payments is to let the investors vote on when it is time to escalate.  Once a majority of the investors vote "no confidence" Kickfurther proceeds with a demand letter and repossession.  This means that companies that talk a good line can get extra time before there is any escalation, and that investors who want to be very pro-active in dealing with slow payers usually are unhappy.  For one thing, at least at this time, given the lack of tracking of inventory sales, there is no differentiation between those who are selling and not paying and those who aren't selling. One of my offers is cloth diapers.  They  have run into manufacturing delays and therefore have not sold (or even tried to sell) the diapers.  That's the risk I accepted when I invested on this platform.  Another offer is some bicycle lights.  The owner admits to selling 15% of the lights, without paying backers anything, because he needed the money to run the business.  As far as I'm concerned, he is in breach of the contract and his contract should be cancelled immediately and the inventory repossessed.  If Kickfurther doesn't show that they are willing and able to enforce their contracts, they are going to fail.

My Kickfurther Results

Money Invested

So far, I've invested in 104 Kickfurther offers.  My basic investment is $50, though I will invest more on second offers by a company or if something particularly appeals to me in an offer.  The total amount I've invested via Kickfurther is $2,691.67 and I've put $5518.69 toward claims (as one offer pays off, I reinvest the money in another). 

Cancelled Offers

Of those 104 offers, eleven were cancelled before they got started, generally because they didn't attract sufficient investment.  Four failed (one paid back about half what was owed, the others hadn't paid anything) and Kickfurther refunded investors' money so we had no gain or loss.  I still haven't heard what Kickfurther's final results with those offers were.  I've heard one company turned over the inventory, but I haven't heard whether Kickfurther was able to get anything for it.  I have not heard about the others. Kickfurther paid off those offers as part of their "learning process"; I do not expect that to happen on future failed offers. 

Troubled Offers

There are are various amounts of time allowed at the beginning of offers to allow for manufacturing and transportation during which no payment is due, since the payments are supposedly related to the sale of merchandise. Twenty-seven of my offers are currently in the payback stage, meaning that payments are or have been due.  Of those twenty-seven, eleven are behind schedule.  Now, that number is a little skewed because offers the same age as some of those have already paid back--the ones that stick around for a long time are ones that are trouble.  Because it is not in my best interest to badmouth those companies, I am not going to name them here, but I will describe them and the current status of their offers.  

Bedding:  The company is running into sales trouble and has paid back about 20% of the offer.  I believe that the unsold comforters are still in inventory and that we may eventually be made whole, but the return will not be good.

Kitchen Drawer Accessories:  First, the company claimed manufacturing delays.  Then poor sales.  Now, the owner is trying to sell the company.  About 20% of the offer has been repaid and unless the company sells, I don't think we'll see our money.

Cloth Diapers:  They ran into manufacturing delays and problems.  They are supposed to be making their final payment soon; instead they haven't made any.  Hopefully the diapers will sell once they are done.

Clothing:  They were supposed to pay out over five months; now it has been seven and only about half the money has been repaid.  They are making small payments but the inventory does not seem to be selling.

Bicycle Lights:  These were supposed to be paid out over eight months; we are now at month seven with no payments, even though the owner admits to selling 15% of our inventory (and based on what he said, I think he has sold 22% of it).  This is one of those cases where I think Kickfurther should step in; he is obviously violating the contract and they are doing nothing.

Maternity Clothes:  This store financed winter coats which did not sell as well as expected.  The owner is paying off the claim, but is behind schedule.  I think we'll get out money; it will just be late. 

Swimsuits:  Payback is behind schedule due to sales; owner says sales should pick up due to season and she will pay back in June.  

Swimsuits:  Six months into an eight month offer, only 17% has been paid back; owner promises better days ahead.

Athletic Shirts:  First two payments were fine; paid back 34% of the offer.  Company has been sold and new owner won't pay.  This is another one where I think Kickfurther needs to step in, whether or not the investors vote "no confidence".  

Athletic Mouthpieces:  They've paid back 40%.  First, they complained that Amazon changed terms on them and that's why they were late. Then they said they are in a slow season.  They say they will pay, or, failing that, turn in the inventory.  

Luxury Beauty Products:  First two payments were on time; 33% has been paid.  Two payments have been missed but they promise to pay in May.  Since they were supposed to be able to pay after selling 16% of the merchandise, I'm concerned.  

Finished Offers

I have 32 offers which have paid out.  My total profit is $195.15.  I ran all the numbers through the XIRR calculator and found that if you assume all my currently late offers will pay, my annualized return is about 18%. If you assume that none of them pay, it goes down to about 8%.  However, if you subtract the $175 Kickfurther paid me for the offers that went bad, I've barely broken even, and if I withdrew the money from Kickfurther, I'd be in the hole since they take a withdrawal fee.  


I think Kickfurther's concept has promise but that as it is currently executed, the risks far outweigh the rewards.

Disease Called Debt

Friday, April 15, 2016

6 Things to Do with a Windfall

Financial Windfall

At some point in our lives, many of us will receive a financial windfall--a large (to us) sum of money that is outside our usual paycheck or investment income.  Perhaps we inherited some money.  Maybe we won a big contest, or something happened at work and got a big bonus.    It is even possible that we "hit" big with an investment (or at the casino) and have decided to cash out.  Now that we have this money, what should we do with it?

Build an emergency fund:

If you don't have one, building an emergency fund should be at the top of your list.  Everyone needs a cushion against unexpected expenses because people get sick, car and appliances break and sometimes we just need to have a little extra fun.  Your emergency fund can be the difference between paying cash for those things or using a credit card and paying obnoxious interest on them.

Put it in  your 401k:

This is a good place for money if you have a bad habit of spending whatever is on hand, and need to save for the future.  Compare your windfall to your current take home pay.  See how much your company will let you put in your 401k over the next six months or year.  How much of your paycheck would you have to save to consume your windfall?  The idea is to spend your windfall on living expenses and put your windfall into a tax-advantaged account.  I did this with the first installment of my inheritance, and it saved me a couple of thousand in taxes last year.  

Fund a Roth IRA:

If you want to take money out of a regular IRA or 401k you are going to have to pay penalties, on top of taxes, unless you are over 59.  A Roth IRA is different. You can withdraw your contributions at any time, without penalty or taxes (since you already paid the taxes).  While your money is in the Roth IRA, earnings are not taxable.  If your budget will not allow you to max out the Roth for retirement savings, you can use it for shorter-term goals like saving for a down payment on a house, saving for your next car or for putting away money for the kids' education.  

Pay off Debt:

Why wasn't this under (or above) setting up an emergency fund?  Because not all debt is horrible and I think getting a savings/investment plan in place is more important than paying off your house or a car that you have financed at a reasonable rate.  On the other hand, credit card debt can be debilitating to your efforts to get ahead in the world, and unless the interest rates are very low, student loans need to be disposed of as soon as possible; otherwise they can limit your ability to move on with life.  

Treat Yourself:

If you don't owe money (other than a mortgage or a low APR car loan), have an emergency fund and are actively saving for retirement, spending part of your windfall on something nice for yourself (whether that means a vacation, a new(er) car, a new phone, or a fancy dinner out) can make you happy and if money can't buy a little happiness, what's the point of having it?

Give it Away:

Since this is money you did not plan to receive, it is money it should not hurt (too much) to give away.  Our world has many needs and I'll bet one of them is your passion-whether it is your church, the local society for the arts, the animal shelter, Ronald McDonald house or hospital.  Generosity is an American tradition, keep it up.  

Disease Called Debt

Friday, April 1, 2016

Financial Update First Quarter 2016

Wow, it seems hard to believe that three months have passed in 2016, but they have.  This week's post will look at our financial status after the first quarter of 2016.

Bank Savings:

We haven't added any money to our savings account but our checking account is about $7,000 more than it was at the end of last year.  January, February and March are our saving months; we have no big periodic bill due during these months.  In April we pay car insurance.  May is summer camp.  Catholic school tuition is due in June, along with life insurance.  July is vacation.  August is college tuition and homeowners and flood insurance.  September is an "off" month, unless we are still paying the homowner's/flood; and car insurance rolls around again in October.  November is "off" and in December we pay for Christmas, college tuition and property taxes.  The point is that while it is much better to have saved the $7,000 than not, it has to help pay those big bills in months to come.

My 401K:

This is up, a little since the first of the year, which is a good thing since it was down almost 5% for the year as of the end of February.  I'm putting 11% of my pay into this account and the firm kicks in 5%.  

Our Vanguard Portfolio:

We have several accounts with Vanguard.  Our Roth IRAs are invested in the S&P 500 Index Fund.  We have a small taxable account that was moved from a brokerage firm to Vanguard, and my husband and I both have regular IRAs that were moved from the brokerage to Vanguard.  When we moved those accounts, we sold the funds that were significantly under-performing as compared to their index but we didn't want to sell everything because of the fees and taxes.  The investments brought over from the brokerage firm are a large collection of various styles of mutual funds.  We took the money from the funds we sold and used it to buy Vanguard's Total Market Index Fund, Total International Bond Index fund, Total Bond Market Index Fund and Total International Stock Market Index fund.  The total value of the account is up for the year, and it has paid over $1,100 in dividends.  

Motif Investing:

I've invested $7,000 in a variety of stocks.  Basically Motif lets you design your own ETF; you can buy shares in up to thirty companies at one time for one commission of $9.95 (and there are times they reduce that price for at least some transactions on a motif).  You can either pick your own stocks or buy a pre-designed motif, and I've done both.  I'm up about $200 since the beginning of the year, and that includes dividends. If Motif sounds interesting to you, use my link and we'll both get $100.00..


I haven't been keeping up my Loyal3 Lunch portofolio; I got into a couple of busy weeks when I ate out way too much and my stats on those posts weren't all that great, so I kind of lost interest.  However, the portfolio I have is doing well; it is worth 6% ,more than what I spent on it.  I have invested in AMC, Walt Disney, Hershey, Intel, Kohls, Target and VF.  All are up except Disney and I plan to buy more of that this week.  

Lending Club:

My account value is up $321 this quarter which gives me an annualized return of 6.6 percent.  I have not added to this account, and do not plan to do so in the near future, just because I want to watch the returns without the addition of new money.


I added $300 to this account in January, and I plan to add some more once we sit down and look at those once a year bills and make sure we  have enough money to pay them.  This is where we are saving for our next car(s).  We have enough money in our savings account to buy those cars tomorrow if we had to (and we buy new (to us) cars when we need to and not before) but it would clean us out.  In Prosper the money gets more interest (we hope) and is reasonably liquid so would use Prosper money to rebuild our savings account.  The account value is up $323 (plus the $300 we added) for an annualized rate of 6.5%.


Kickfurther  is a crowdfunding site where investors help companies finance inventory by purchasing that inventory and then returning it to the companies to sell on consignment.  You can read a lot  more about Kickfurther in other posts on this blog.  So far this year I've added about $37.00 to my investments at Kickfurther.  I also continually reinvest returns.  My account is now worth more than it was January 1.  My lifetime investment is $2,691.67.  I've gotten $15 in bonuses and my lifetime profit is $184.23, or about 6.8% of my investment.  Considering I started with Kickfurther about a year ago, and didn't put most of the money in until late summer/fall, that's not too bad.  However, looking at my investment list, I think there is a decent chance I'm going to lose over $100 of that, depending on how much Kickfurther is able to make off repossessed inventory, and that is something that no one knows at this time.  If Kickfurther looks interesting to you, use my link and get $5.00 toward your first investment. 

Freelance Writing:

One of the companies about whom I wrote on this blog asked me to write a post for their blog.  Then I started soliciting clients and looking for work and so far this year I've earned over $200.  Considering there is no commute,  and I can do it in my pjs while supervising homework, it works for me.  At least at this point my boss doesn't have to worry about me quitting my job to write full time.  


Things are pretty much on track.  That $7000 extra in our checking account will pay the car insurance and the Catholic school tuition.  We should be able to handle most of the other bills out of monthly income, but we'll need to save up for that August tuition payment and the homeowner's insurance payment.  The market is doing well so we are making money, and that's a good thing.  
Disease Called Debt