Thank Your Lucky Stars It Ain't 1950

I ran across a great post by Todd Ballenger of Borrow Smart Retire Rich. His post on Lifestyle Inflation today is very insightful. It breaks down how much we have to work at the average wage to buy typical household goods and compared today’s hours versus 1950’s. Pretty fascinating, check out the chart on the blog. Here is a little of what he said:

“Isn't it amazing, that we feel like we are working so hard for less.  Yet, we've said before that the richest man in the world couldn't afford air conditioning.  Who was that?  It was Getty, and air conditioning wasn't invented in his life time.  We take it for granted now don't we?  It would take us almost 8 months of work to afford the same material goods in 1950, versus less than 2 months today.  You would think we would be awash in 'free time', but our lifestyle inflates to absorb the new efficiencies.”

When things are not going the way we like, it is easy to get caught up in the trap of focusing on what isn’t going well instead of looking for what is going well. We really live at an amazing time in the world’s history and have so much to be grateful for.

“Happiness cannot be traveled to, owned, earned, worn or consumed. Happiness is the spiritual experience of living every minute with love, grace and gratitude.” – Dennis Waitley

“The hardest arithmetic to master is that which enables us to count our blessings.” – Eric Hoffer

Reflecting on many of my failures, often times at the root has been a lack of persistence.

Calvin Coolidge declared, “Nothing in this world can take the place of persistence. Talent will not; nothing is more common than unsuccessful people with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan “press on” has solved and always will solve the problems of the human race.”

By understanding this, I still have not acknowledged the elephant in the living room…how do you increase persistence if you are not adequately satisfied with your current “persistence muscle”?

In one of the best all time books on accumulating wealth, Think and Grow Rich, Napoleon Hill states this formula for developing persistence.

How to develop persistence:

1. A definite purpose backed by a burning desire for its fulfillment
2. A definite plan, expressed in continuous action
3. A mind closed tightly against all negative and discouraging influences, including negative suggestions of relatives, friends and acquaintances.
4. A friendly alliance with one or more persons who will encourage one to follow through with both plan and purpose.

How clear is your purpose? Can you visualize it to the point that it appears real? Do you have a plan to achieve it? Is it written down? Is it reviewed daily? What are you watching and listening to? Who are you hanging out with? What are you reading? Who is holding you accountable? Do they believe in you? Will they let you off the hook?

A Japanese proverb states, “Money grows on the tree of persistence.”

Just Give Me the Friggin' Magic Bullet

Over the last few weeks I have been listening to the 4-Hour Workweek by Tim Ferris during my workouts. (In a business course I am in they call that a full move, workout and learn, instead of compartmentalizing the two). I have really enjoyed his perspective on work, not as a “consume your life” activity, but as a “fuel for your life” activity.

While reading the book he pitches a product that he sells called Brain Quicken. It is a speed reading course that he raves about. Disregarding the conflict of interest, it is something I have been intrigued by for some time.

I have a stack of books on my nightstand that I cannot get through quick enough. Feels like too much to learn and too little time…so that led me to the investigation of speed reading. I researched some books and sites, one of the better appears to be mother of speed reading, Evelyn Wood. Lastly, I fortunatlely consulted with a friend who is an avid reader and relentless learner. He is the CEO of DotNetNuke and possibly the best thinker I have ever associated with.

He also was intrigued by the concept, did some research of his own, sent me the link to StraightDope that explains " you get the text's general drift while remaining largely innocent of the details, sometimes embarrassingly so." 

More importantly, he made an observation that I should have made myself, “We need good research and a very respectable reference before we expend time (forget money) on this.” 

We both realized that we have never met someone who is a great thinker and wildly successful in business, let alone life, that is a speed reader.

Mike Ditka, the head coach of the Super Bowl champion Bears said it best, “If things came easy, then everybody would be great at what they did, let's face it.”

Being a life long learner is not easy and it is that very fact that separates those who are willing to pay the price from the rest of the field. Knowledge wins in this new economy and to gain it takes time, energy, sacrifice and persistence.

The Assault of Sustained Thinking

“No problem can withstand the assault of sustained thinking.” – Voltaire

I have found that critical, deliberate thinking takes great emotional strength and discipline. We have a society that leaves no room for thinking.

With the I-Pod going every spare moment, DVR’d TV programs at your disposal in excess, the internet and radio you could go a whole week without a minute of quiet time to direct your own thoughts.

Creating the space to think and then having the fortitude to intentionally direct your thoughts as opposed to letting them wander is a much more difficult practice than it appears.

I went through a phase, in an attempt to strengthen the power of my mind, where I would pick a topic and try to focus on it for the entire shower each morning. It is amazing the tangents you can get off on. If you don’t believe me, try it tomorrow morning. I would start out with a topic like golf. Next thing I knew my mind had meandered to beautiful scenery to Hawaii to beaches to surfing to sharks and my fear of them. I couldn’t believe that I was able to make that journey in 45 seconds, while consciously trying to focus just on golf.

Voltaire has spoken a profound truth, if we can learn to create some time each day to think and if we can learn to channel our thoughts in a focused direction, there is not a problem in our lives that can withstand the assault of sustained thinking.

Instead we have become lazy in hoping that our problems will resolve themselves without any real thought on our behalf. Critical thinking is key to effective action and satisfying results.

Should I Follow Charlie Brown?

Charlie Brown once declared, “No problem is too big or complicated that it can’t be run away from.”

That certainly seems like the most sensible thing to do right now as the bad news appears to be stalking us in a majority of conversations, radio shows, newspapers, and news programs.

I am afraid we are not fast enough to run, so we might as well stand up and fight. We must look for the silver lining. There is great change in our world today and it is through this change that doors are opened.

It is change that creates the opportunity for new offers of help, new businesses and services.

My brother is in the high-end construction business and you can imagine how lucrative that is right now. Instead of spending all day lamenting over the old business model he had that has so cruelly been jerked out from under him, he started meeting with the influential people he knew to get their interpretation of what is to come. In one of these conversations, he was tipped off to an opportunity coming in the commercial real estate markets. Due to a mass exodus of businesses, shopping malls and office complexes are going to have vacancies like never before. In order to lease the space out again, the landlords gut them out, taking them back down to the shell to make them a blank canvas for the prospective tenants. 

Without the change we are experiencing, that opportunity would not be there. What opportunities are around you that you may not have previously seen?

Trade My Rolls for Your Station Wagon?

Don’t things change quickly? For the last 8-10 years it was the Donald all over TV with the hit Apprentice. The primetime show was laced with images of black jets with TRUMP painted in Gold, sleek helicopters, and fancy cars.

The Donald’s home town now has an emerging trend quite different than what you would expect… frugality. The NY Times reported that a real estate broker, Sharon Baum, is feeling like it is not in her best interest to be sporting a green Rolls Royce around town. She was quoted as saying “But now, with the recession, it’s not an appropriate time — nor do I want to be riding around in a Rolls-Royce.” The car was her trademark since 1996 and now she is concerned about the image she is portraying. Her plan is to garage the car and drive her station wagon around.

Saving is "En Vogue" now, which, based on statistics is a long time coming. In the third quarter of 2008, the personal savings rate was 1.2%. When the government started tracking the savings rate in the first quarter of 1952 it was 8.6% and it was 7.9% just 20 years ago in the third quarter of 1989.

Although, we have quite a hole to dig out of, it is nice to see frugality coming back in style. MSN Money reports a growing trend of second hand shoppers, some 60 million Americans! There was a day a couple of weeks ago where I would have lied to my mother about the fact that I was buying something from a second hand store. The smell alone makes me want to run the other direction. Now it is the cool thing to do.

Both of these examples are extreme and I am sure there is a more palatable middle ground...I will be looking for it. In the meantime, station wagons and second-hand clothes, here we come. I wonder if couches on porches are coming back soon too? 

Infinite Self-Discipline?

Ever feel like you got the short end of the stick when it comes to self-discipline or will power?

I ran across a series of experiments that indicate we have a finite self-discipline reservoir, not an infinite amount of self-discipline as we would like to think.

In one experiment, two groups were asked to come in to solve a puzzle. What they did not know was that the puzzle was insoluble. While in separate waiting rooms, a plate of fresh, warm cookies directly out of the oven was brought in and placed on the table in front of the group. They were informed that the cookies were not for them but for the next group, and to please refrain from eating them. A similar thing happened to the second group, except they were brought a tray of sliced cucumbers. After a number of minutes, the groups were ushered into another room to begin the puzzle. The experiment was designed to determine how long each group would persist on the puzzle before giving up. As you probably suspected, the group that had to withstand the temptation of the cookies lasted far less time on the puzzle than the cucumber temptation group.

In another experiment, one group of subjects was asked to hold their hands under ice water for a specified period of time. They performed significantly worse on a series of subsequent proofreading tasks than a group that had not been subjected to the ice water challenge.

These, as well as other experiments, illustrate convincingly that we all have less self-discipline than we realize and therefore we must call upon it selectively. Even small acts of self-control use up this limited reservoir of energy, leaving us less energy for the next task.

It does not mean that we are doomed to a life of mediocrity, it does mean that we must create habits. Once established, habits no longer require energy or self-discipline to perform. They actually take energy to break. The key is to methodically build a life of productive habits…one at a time. The temptation will be to start a number at once, like New Years resolutions. Use your precious, limited energy to build successful habits, one by one.

What if you established one new habit each quarter this year? Imagine the different results you would see in life.

The gates of history swing on small hinges.

Is It Coincidental

My wife and I just moved out of our condo and as we made one last trip down the hallway I was reminded of an observation I had made many mornings.

Of the 10 or so units on our floor, six or seven received the New York Times, three received the Wall Street Journal, and only one received the local Oregonian newspaper. In the two other buildings we had lived in the only paper I had ever seen was the Oregonian.

The difference became apparent that in our most recent condo we lived on the top floor and the median income was significantly higher than the other two buildings where we did not live on the top floor.

I have since began paying closer attention to what different income classes read and it varies greatly, one class from another. Yet within the income class, birds of a feather flock together.

What are you reading? Does it even matter? 

I am certainly not suggesting that reading the right newspaper is the sure path to riches...

For a great Japanese proverb states, "If you believe everything you read, better not read."

The important questions is, "what else do “they” do differently?"

Do What the Billionaire Does

In December Billionaire Phil Ruffin Sr. bought MGM’s Treasure Island Casino in Las Vegas for $775 million, reported the Wall Street Journal.

“I knew to build a 3,000 room hotel today would cost $3 billion,” Mr. Ruffin told the Wall Street Journal. “I think it is a good value.”

Lesson 1 – Know Your Numbers

Mr. Ruffin, who made his first fortune leasing gas stations and convenience stores, was one of only a handful of potential buyers who had the cash on hand to complete a purchase.

Lesson 2 – Cash is King…”No man's credit is as good as his money.”  ~E.W. Howe

Mr. Ruffin is buying back into Vegas after having sold his previous venture at the height of the city’s real-estate boom.

His Las Vegas record has so far been a lesson in restraint, and impeccable timing. In 1998 he bought his first Las Vegas casino, the New Frontier – a low rent property mired in a six-year union strike – for $165 million. Less than a decade later, he sold it for $1.24 billion at the height of a Las Vegas land-buying frenzy.

Lesson 3 – Buy When No One is Buying and Sell When No One is Selling

Years earlier, while other Las Vegas operators took on billions in easy debt to outdo one another with ever-more extravagant gambling palaces, Mr. Ruffin cancelled his own $2.7 billion plan to tear down the New Frontier and build a new resort in its place. “It wasn’t a difficult decision because the numbers didn’t work,” he said in a phone interview. “I’m pretty good at math.”

Lesson 4 – If the Numbers Don’t Work, Don’t Do It

When asked about the recent email promotion Treasure Island recently sent out for $49-a-night rooms he laughed and said, “We know it is going to be soft for a couple of years. That’s OK. We won’t have any debt, so we’ll be OK. That’s what gets everyone in trouble, they pile on that debt.”

Lesson 5 – Debt Closes the Doors of Opportunity

4.50% Interest Rates…Hold Your Horses

A report leaked last week that the Federal Reserve was considering lowering the 30 year fixed rate to 4.50%, over a percent lower than the current market, in an effort to stimulate home buying.

The Wall Street Journal reported the following:

- “The plan, which is in the development stage, would temporarily use the clout of mortgage giants Fannie Mae and Freddie Mac to encourage banks to lend at rates as low as 4.5%.”

- “The plan remains in discussion and may not be made final before the Bush administration’s term ends in January.”

- “The lower interest rates would be available only to borrowers who are buying a home, not those refinancing a mortgage.”

- “Borrowers would have to qualify for a mortgage guaranteed by Fannie, Freddie or the Federal Housing Administration. Those guarantees apply to loans where borrowers can document their income and afford their monthly payments, steering the government away from backing loans considered risky.”

How would this happen…and would it work?

Fixed mortgage rates are tied to Mortgage Backed Securities (MBS) which are similar to stocks except that they are tied to mortgages as the security whereas a company is the security for a stock. Both stocks and MBS are priced based on supply and demand. The more investors want a stock the higher the price goes and vice versa. MBS function the same way.

Because the  price is determined by supply and demand, the Fed would have to artificially drive the rates down to 4.50%. In plain terms, they would pay to get them down. The only source of cash I know about would come through borrowing or printing the money needed to pay the difference between the current market rates and the new target rate.

When the government borrows and/or prints money, it is inflationary. Inflation simply means that the dollar you have now will not go as far in the future because it is worth less. By artificially driving down rates they will be stoking the inflation fire.

The reason this is bad for interest rates lies in the mechanics behind how rates work. As mentioned before, rates come from an investment vehicle called MBS. Investors who choose to put their money in MBS instead of stocks do it because they are looking for a safe, fixed return. If the return they want is say 4.50% and inflation strikes, the return of 4.50% is actually worth less than that. In other words, if your 4.50% investment paid you $1000 month and the inflation rate goes up, due to the government borrowing or printing money (which it will), then your $1000 will only buy you $900 worth of goods and services. Now the investor needs a 5% return to buy the equivalent to $1000 worth of goods and services. This is a vicious cycle and will work against the very mechanism used to artificially drive down rates.

In summary, can the government artificially drive down rates? Yes.

If they do, will it last long? I do not see how it could based on the mechanics of the market I have described above.

If they do it, who will benefit? Because it will take money to drive the rates down the Feds would need to identify some parameters on what loans they would offer this on. It will certainly only be purchase loans as mentioned in the WSJ and I speculate that it will be for a specific target market, maybe a certain loan amount range and quality of buyer. They do not have the money to open it up to all loans of any size or type and any and all borrowers.

If it happens, great. If it does not, rates are fantastic now and more importantly, the big money is made on a purchase through negotiating the right price, not a little lower interest rate. What makes buying now so appealing is the phenomenal deals you can get. If 4.50% comes and everyone jumps in, don't you think sellers will hold more firm on their prices with buyers swarming everywhere?

Don't Be a Fearmonger

If you look around you will notice that nearly everyone around you is scared. They are not sure what will happen with the economy and more importantly their jobs. Will they ever be able to recover from the 45% haircut the stock market drop has given them?

A very insightful article came out in the New York Times on Sunday titled In Hard Times, Fear Can Impair Decision Making. It is written by Gregory Berns, a neuroeconomist and directs the Center for Neuropolicy at Emory University. In the article he makes the following observations:

“And while fear is a deep-seated and adaptive evolutionary drive for self-preservation, it makes it impossible to concentrate on anything but saving our skin by getting out of the box intact.”

“Ultimately, no good can come from this type of decision making. Fear prompts retreat. It is the antipode to progress. Just when we need new ideas most, everyone is seized up in fear, trying to prevent losing what we have.”

Take some time to observe your own behavior and test what he is saying. It is certainly true with me. Now is the time to go against the grain and create opportunities for ourselves. You may be thinking, easier said than done. You may be surprised.

“The most concrete thing that neuroscience tells us is that when the fear system of the brain is active, exploratory activity and risk-taking are turned off. The first order of business, then, is to neutralize the system.”

“This means not being a fearmonger. It means avoiding people who are overly pessimistic about the economy. It means tuning out media that fan emotional flames. Unless you are a day-trader, it means closing the Web page with the market ticker. It does mean being prepared, but not being a hypervigilant, everyone-in-the-bunker type.”

I would suggest a couple of more things that you can do to “neutralize the (fear) system”:

1. Spend 10-15 minutes each morning visualizing your ideal life
2. Spend 20-30 minutes reading something uplifting (personal growth book, poetry, human victory story)
3. Workout for at least 30 minutes per day
4. Start a gratitude journal, taking careful inventory of all that you are blessed with
5. Set goals and clear daily and weekly objectives so you have a clear path of the life you are designing. This will take you out of the helpless victim role that often accompanies fear.

            

My Wife Was Right... Again

As is true to the relationship my wife and I have, she was right, but I wouldn’t accept it until someone else told me.

I had tried to get her to read more business and personal growth books for a number of years as she read a bunch of stuff that would surely never make anybody any money. She reads a wide variety of literature including the classics and poetry.

Wise old me had spent the last decade reading the business bestsellers along with every financial book I could find. Although I have learned a lot over the years, it was not the secret formula.

It was then that I was introduced to an article in the New York Times titled C.E.O. Libraries Reveal Keys to Success.

Michael Moritz, venture capitalist and owner of a huge library, says he can’t discard books.

The article is summed up best by a line in it that declares, “Serious leaders who are serious readers build personal libraries dedicated to how to think, not how to compete.”

To be really wealthy I cannot copy or mimic what others are doing and expect to get top 1% results. In other words, if I spend my time attempting to do what others have done I will always be one step behind. I must learn to think for myself.

What do the best thinkers in our country read?

Read the article and see for yourself, but don’t tell your wife that this is where you learned it!

I.O.U.S.A.

If money plays a role in your life then I highly suggest watching the movie I.O.U.S.A. Roger Ebert said, "...it accomplishes an amazing thing. It explains the national debt..."

Visit the official movie website

Reuters said "I.O.U.S.A." "may be to the U.S. economy what 'An Inconvenient Truth' was to the environment."

We must educate ourselves on the forces that will determine our ability to live the American Dream.

Watch the 2 minute trailer

Or watch the Byte Sized 30 minute version of the movie

http://www.youtube.com/watch?v=O_TjBNjc9Bo

To get involved I recommend 

http://ww.pgpf.org/getinvolved/signup/

Seems So Obvious

In every choice there are two elements of the equation, pain and pleasure. In this lies one of the great secrets of life: we have the free agency to choose which one comes first with the great caveat, the element not selected will always come second and last longer. Let me say it another way, the element we choose first has a short duration and the second element will last far longer.

Here is what I mean; not long after I was introduced to this principle I was driving home from Seattle to Portland with a few colleagues. A short distance into the drive I pulled over to get some gas. I broke from the lively discussion on this very topic to go into the quickie mart and proceeded to buy a 44 ounce soda and a 3-packer of cupcakes. You know the really healthy Hostess type. Back in the car and two and half cupcakes down it dawned on me that I had just scheduled pleasure (sugar high) first with the pain (gut ache and life of flab if continued) to follow. What was just as eye opening was that it did not matter whether I was aware of the principle or not. It is a mechanism or principle that functions just the same.

What if I had scheduled pain first by way of water and a Power Bar? Consequently I would have benefitted from long lasting energy and a show stopping six-pack, pleasure! Far better decision.

This principle is highly active and visible in personal finance. I can schedule the pleasure (new outfit from Nordstrom’s) now and the pain (lack of savings for retirement and/or college fund for children) will most certainly follow and last well beyond the awe inspiring confidence of some new digs.

Where in your life are you ignorantly scheduling pleasure first, unaware that a long period of pain is waiting to pounce?

Take an inventory of your personal finances and identify at least one change you could make today by reversing the order of pleasure and pain.

From experience, the short term pain of saying “no” results in long lasting pleasure in the form of great peace and possibility.

Seven Simple Rules to Follow in Life

Joshua Wooden, father of the great John Wooden, gave him a little white note card for his elementary school graduation (back then, graduation of elementary school was a big deal as many did not graduate high school). He wrote the creed he had so often shared with his kids: 

Seven Simple Rules to Follow in Life

1.    Be true to yourself

2.    Help others

3.    Make each day your masterpiece

4.    Drink deeply from good books, especially the Bible

5.    Make friendship a fine art

6.    Build a shelter against a rainy day

7.    Pray for guidance, and count and give thanks for your blessings every day

As he read the card his dad said, “Johnny, try and live up to these and you’ll do alright.”

In a world that is ever-changing and at a rapidly increasing pace, I have begun a quest for principles that are timeless. What can I be sure of in building my foundation?

This was advice given before 1920 and is quite possibly more valuable today than it was then.

It helped build a foundation for John Wooden that led to 53 years of marriage and made him the greatest college basketball coach of all time. He led UCLA to win 10 National Championships in 12 years.

What would the integration of these principles do for your family, career and life? I have no doubt that they will make me a better, more successful and happier person.