Money as a Symbol

A friend of mine owns a coaching company, Sensible Coaching, focused on helping people with money. Her unique talent is helping people and their relationship with money.

She wrote a great article titled “Money as a Symbol” that has some very thought provoking observations.

“We assign meaning and significance to money that is purely arbitrary. We act as if money has will and volition on its own. We blame things on money, and, even more amazingly, we assign responsibility to money. Money seems to be responsible for ideas like “Rich people aren’t as nice as poor people” or “I always struggle with money”. The way these concepts are expressed makes it seem like money itself is the responsible party, and not the humans involved in the process.”

She then goes on to point out that many words in our culture simultaneously hold sway over both money and our sense of who we are. A few examples are:

Worth and worthy. No mistake here. Notice how often we seem to tie our worthiness to our worth. We even speak of “self worth”

Credit. We use the word “credit” to imply validity and trustworthiness, even to give praise. And then there is that whole issue of your credit when it comes to how much you can borrow. Have credit cards changed the way we think of the word “credit”?

Broke. Here’s the big one, if you are broke, are you broken? Many people feel a direct connection here, as if being broke truly does make you a broken human being.

I have had thoughts such as these at times in my life. With reflection, I have learned that money cannot buy me happiness or make me a good or likable person, just as it cannot make my unhappy or unlikable. I look at money as fuel I need to live the life I desire, and like any other fuel, it can run out at times and you can certainly get more.

I grew up with a phrase from a wise mother that was oft repeated, usually after I broke something or wrecked a car… “It is only money, let’s go make more.”

She understood what money was and what it was not. Money is the easiest of life’s problems to fix. 

Lessons From the Men's Urinal

I recently ran across an experiment conducted in the men’s room at Schiphol Airport in Amsterdam. Authorities had etched the image of a black housefly into each urinal. As women can attest to and most men would sheepishly admit, men don’t pay much attention to where they aim, which can create a mess. However, if they have a target, something to aim for, their attention and therefore accuracy are dramatically increased. According to the man who came up with the idea, it works wonders. “It improves the aim,” says Aad Kieboom. “If a man sees a fly, he aims at it.” Kieboom, an economist, directs Schiphol’s building expansion. His staff conducted the fly-in-urinal trials and found that etchings reduce spillage by 80 percent.

The results are shocking when we have something to aim at. Prior to the target, the men didn’t even pay attention. With a target, attention increased and results improved by 80 percent. Doesn’t this same lesson apply in all areas of our life?

What if in our careers, we had an income target? Not the one the boss sets for you, but one that matches your prerogative and ambition? Wouldn’t your attention increase? You would have a better filter in which to run your actions through, quickly realizing that much of what we do in a day will not increase income. This income target, etched in your mind would surely increase your aim, focus and results.

What if in our finances, we had a short-term, mid-term and long-term target to aim at? Wouldn’t you pay more attention to what you were spending your money on? If there was a way to keep those targets in mind every time you went to make a purchase, don’t you think you would increase your results by 80 percent? 8 out of every 10 times you would be able to make a more grounded decision on need versus want.

What are you aiming for?

“Most people aim for nothing and hit it with amazing accuracy.” – Joe Niego

Successful Habits Formula

“Our character is basically a composite of our habits. Because they are consistent, often unconscious patterns, they constantly, daily, express our character.” – Steven Covey

While re-reading The Power of Focus by Jack Canfield and Mark Victor Hansen I came across a section they call The Successful Habits Formula. It is really pretty simple, yet I have learned that it is through small and simple things that the great things come to pass.

The Successful Habits Formula

1.      Clearly Identify Your Bad or Unproductive Habits

Make a list of them, everything from watching too much TV to sleeping too much to not working out. Write beside it the long term implications of that habit, be honest with yourself.

2.      Define Your New Successful Habit

This is usually the opposite of the bad habit. Read instead of watching TV or getting up early to work out instead of sleeping in and not working out. Most importantly, write a vivid description of the benefits of the action.

3.      Create a Three Part Action Plan

What are things you could do that would implement the new habit. Using the working out example: get a gym membership, develop a workout routine and schedule, get a friend to meet you at the gym as an accountability partner. Make sure you are being accountable to someone. I have found this to be key.

It is very important that you prioritize these new habits and start with ONE. If you attempt to do multiple habits at once, you will eventually run out of self-discipline and return to mediocrity.

If you only changed one habit per quarter, imagine the difference you would see after only one year. Imagine a life of that!

Steve Prefontaine said it best and I have tried to make this my mantra “To give anything less than your best is to sacrifice the gift.”

It Is Not the Critic That Counts

"It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat." - Theodore Roosevelt, Paris - April 23, 1910

I have this quote hanging on the wall of my office and hope you find it as inspiring as I do.

How Are You Dealing With Change?

This recession underscores the harsh consequences of the failure to understand and respect the fundamental truths of the marketplace.

Two of these truths are:

1. real estate and stock markets are cyclical (they go up and down)
2. the marketplace is constantly changing due to technology, demographics, economics and politics

As I look around at different people, those who are the most afraid are those who are most lacking knowledge. They don’t understand the drift of the marketplace. They are completely dependent upon their employer for their ability to eat. They have abdicated the thinking and planning of their future to their boss. They have taken competitive learning out of their life since college and are “hopeful” that everything will work out or return to how it was.

"Success depends upon previous preparation, and without such preparation there is sure to be failure." Confucius

Now is the time to prepare for the future. Life is not going to get easier, we need to learn to make it easier. We need to take the responsibility upon ourselves to learn and think and strategize and act powerfully. We cannot rely on someone else to figure it out and then “hope” that we fit into the plan.

The world will never be the same and as far as I am concerned that is great news. It is the change that creates new opportunity and the person who is prepared will reap the rewards.

“Luck favors the mind that is prepared.” - Louis Pasteur

Here are some sources for learning:

The Aji Network – I have been in courses with them for 3 years and it has completely changed the way I think - http://www.theajinetwork.com/index.php

TED.com – source for tons of educational videos, all free - http://www.ted.com/

MIT OpenCourseWare – MIT has made available all of their curriculum for free - http://ocw.mit.edu/OcwWeb/web/home/home/index.htm

Insightful Magazines – most are fee now online – Fast Company, Inc, The Economist, Business Week,

Read Books – ask those around you that are successful what they are reading – libraries are still free!

Can You Hand Me That PledgeHammer?

One of the topics that I have been passionate about for sometime is the need to build successful habits to reach your potential. Dr. Tony Schwartz teaches in the Power of Full Engagement that we have a finite amount of self-discipline and therefore we can only set out to change a limited number of things in our life at a time without running out of energy.

Ever wonder why you are not the only one who has failed at keeping 29 different New Years Resolutions? He says the solution is to build habits. Habits once effectively established no longer take self-discipline to keep going, but rather energy to break.

An important part of building these new habits is being accountable. I recently ran across a website that does just that, helps you be accountable.

www.PledgeHammer.com

Pledgehammer.com is a site that helps you keep your promises. They do this by making your pledge public and asking you to decide on a deadline as well as a financial incentive. Should you not succeed they ask you to donate money to a charity you choose yourself. This way your unsuccessful pledge may help to save the rainforest or support families in third world countries, making it not all that unsuccessful after all.

I thought it was a very interesting idea and one that can certainly help in an area that I believe we all could use help in.

Money Can’t Buy You Happiness…or Can It?

“Money can’t buy you happiness…but it can buy you a Waverunner,” said the comedian to start his routine.

I couldn’t say it better myself. Last night, my wife and I had a conversation on this very topic. Fortunately, we both agree that money cannot buy you happiness. I spent 2 years in Brazil on a mission for my Church and experienced poverty beyond comprehension for this day and age. What shocked me was the observation of the families who lived in it, often times were happier than the wealthy American families that I knew back home. To prove I was not in some spiritual fantasy land, I certainly experienced families in the depths of poverty that were absolutely miserable and unhappy.

The lesson I learned is that the two are disconnected. Happiness and pleasure have been used interchangeably in the English language and I think they are very different. Pleasure is short term, and I know first hand that money can buy you pleasure. What I have yet to see is the case where money bought long term happiness.

What money can do is enhance an already happy existence. Yesterday I talked to one family who went camping over spring break. Now, I happen to know camping was the recreation of choice because it is virtually free. By the way it was 45 degrees and raining! I know of another family that went to Mexico for the week and stayed in a beach front villa. All things being equal, I’ll take the Mexican trip to paradise please.

That leaves us all with some thinking and planning to do. First and most important, what is happiness? How do I achieve it today, tomorrow and twenty years from now? Secondly, what is my ideal life and how much does that cost? How will I fund it?

How Does That Math Work?

I spent some time with a very bright money manager yesterday and he shared something that I had never noticed or more importantly understood.

For simplification purposes, I will show you 4 years of stock market returns. We will start with $100,000 in our account and then I will specify a certain stock market return for that year and then the next years balance will be a result of that previous years return. Let me show you:

Year 1

Starting Balance $100,000

Stock Market Return -50%

Year 2

Starting Balance $50,000

Stock Market Return +100%

Year 3

Starting Balance $100,000

Stock Market Return -50%

Year 4

Starting Balance $50,000

Stock Market Return +100%

Year 5

Starting Balance $100,000

In this example, we had 2 years that had a 100% return and 2 years that had a -50% return. If we were to calculate the average rate of return for those four years you would get an average 25% rate of return. In reality, you finished with the same amount you started with, $100,000, no where near a 25% rate of return.

The numbers that are thrown around in your mutual fund and 401k prospectus are designed to help you, but do not tell the whole story. More time must be spent really understanding your numbers because your ability to retire depends on it.

Take your investment accounts statements out and figure out how much you started with, how much you added, and how much you have now. Do the math, you’ll be shocked at the results. (If you don’t know how to figure it out, go find someone who does, or spend 20 minutes on google. It will be time well spent)

What Is Your EVE Ratio?

EVE is an acronym for education versus entertainment. I was tipped off to a company called iLearningGlobal that talks about this EVE ratio.

They suggest that your future “destiny” depends greatly on your EVE ratio. I am not sure I agree with the word choice "destiny" but maybe destination. 

Most people spend far more hours and money on entertainment than they do on education and yet remain perplexed at how unsatisfied they are with the results or destination they have reached.

Did you know that the average U.S. household watched TV for 8 hours and 18 minutes a day from September 2007 to September 2008, which is a record high since the days Nielsen Co. started measuring television in the 1950s.

What is your EVE ratio? Take one week and add up the hours of each. 

Are you shocked at how little time and money you spend on improving yourself and your ability to build the life you desire?

The great Zig Ziglar said, “You don’t have to be great to start, but you do have to start to be great.”

Now What?

After yesterdays post on "How Much Should You Be Saving Annually" you probably realize how much you underestimated the amount of money needed to invest to live in retirement. As I see it, three options arise:

1. Increase current income – if you are going to be a passive investor, you are bound by the economic factors of 8% annual return, 3% inflation, and 4% withdrawal rate, you simply must earn more money to allow for today’s requirements and tomorrow’s future
2. Become an active investor – if 8% won’t get you there, you must learn different strategies for netting a higher return. Real estate or investing in businesses could be an option.
3. Build a business – one of the great advantages of being self-employed is the autonomy you have to build something of residual value. When you are an employee, in most cases, you work for today’s wages and the day you retire your income stops. By building a business, you open the door to producing an asset that could be sold at retirement for a lump sum payment or residual income.

Most likely, any of the options above are going to require more knowledge than you currently have. The good news is that with the internet, almost all of what you need is at your fingertips and much of it is free.

Begin by talking with people you know who have already reached their financial goals with a fully funded retirement. Discover how they did it. Get to know others who are on their way and figure out what they are doing. Read some good books, go to some classes and seminars to increase your understanding of these options.

What you should not do is:

1. keep doing what you are doing
2. keep hanging out with the same people who are also not on track
3. keep reading the same things you have been reading
4. keep watching the same things you have been watching
5. keep spending your time doing the same things you have been doing

“When we are no longer able to change a situation, we are challenged to change ourselves.”  ~Victor Frankl

“If you don't like something change it; if you can't change it, change the way you think about it.”  ~Mary Engelbreit

How much should you be saving annually?

Have you ever wondered how much money you should be investing to insure you have enough at retirement? I have been in a course for three years now called the Aji Network and they talk a lot about this. A paper they released is very helpful for your calculations to how much capital (money invested) is needed to produce $100,000 a year in today’s dollars.

First let me give you some assumptions that were made in arriving at this point:

3% Inflation – the historical average (avg. increase in the costs of goods and services)

8% Return on Investments – historical average if passive investing (putting money in market and leaving it)

4% Annual Withdrawals from Principle – this is given as the maximum rate of withdrawal as to decrease the likelihood that you will run out of money before you die (this is determined based upon the Monte Carlo calculations that take into account stock market volatility)

 Here are the figures:

 Age - 30                    

Years to Work until 62 - 32                    

$100k income at retirement - $257,508    

Capital-at-Work needed to be on track today - $264,326        

Capital-at-Work needed at 62 - $6,437,707 

Minimum Annual Payments if started today - $47,966

If interested in looking closer, check it out the chart on their website.

If you think you can live on less than $100,000 after taxes you can cut the above numbers in half. Either way, it creates the need for some action and certainly a strategy and most likely a strategy different than the one you have. Now is the time to build the strategy and to do that you must begin to build relationships with those further down the road than you are.

Impact of Attitude on Life

“The longer I live, the more I realize the impact of attitude on life. Attitude, to me, is more important than facts. It is more important than the past, than education, than money, than circumstances, than failures, than successes, than what other people think or say or do. It is more important than appearance, giftedness or skill. It will make or break a company...a church...a home.

The remarkable thing is we have a choice everyday regarding the attitude we will embrace for that day. We cannot change the past...we cannot change that people will act in a certain way. We cannot change the inevitable. The only thing we can do is play on the one string we have, and that is our attitude.

I am convinced that life is 10% what happens to me and 90% how I react to it. And so it is with you...we are in charge of our attitudes." -   Charles Swindoll

This is a quote that my mother had hung on our fridge growing up. For years I was forced to look at it every time I was hungry. It was a mantra that she lived and in turn we learned from. What a blessing a positive, intentional mother is. What a better life I live for having been exposed to this philosophy.

Are They Scaring You?

I thought it would be important to take a step back for a moment and quickly analyze who is footing the bill for those that are acting as alarmists. Primarily journalists and politicians.

Journalists are paid by advertisers. Advertisers pay for high traffic and big viewership/readership. The more people the journalists can get to pay attention to what they are saying the more ads they can sell and the more money they make. They know that they are in the entertainment business. If they can trigger a mood of worry, we will keep coming back for more.

Politicians are paid by the American people. The masses. If everything is great, then we will feel like we do not need their help. So it is in their best interest to dramatize a situation with scary language so that we feel vulnerable and afraid, and they can come to the rescue like a knight in shining armor. Here to save the day and give everyone money.

Walking around in a state of worry and fear will never allow you to think clearly which is exactly what is needed in a changing environment. Just as past expansions inevitably set up future contractions, the present contraction is setting up our future expansion. Of course the ones who will be poised to take advantage of it will be the ones thinking clearly now.

Opportunities abound. In a year or two the stories will start to come out about the visionary, courageous people who thought clearly and created powerful business offers in the midst of the firestorm. Why can’t you be one of them? You can bet I am working on mine.

Just Doesn't Make Sense

Our current bailout strategy doesn't make sense to me, but I didn’t think I was intelligent enough to be the one pointing it out. Well I found someone who is smart enough and eloquent enough to explain why this fundamentally cannot work.

Legendary global investor and chairman of Singapore- based Rogers Holdings, Jim Rogers said the US risks sending the world into a depression as its bailouts of failed companies rob healthy businesses of capital.

Speaking to Bloomberg TV today , Jim Rogers said: “The U.S. is taking assets from competent people and giving them to incompetent people,” said Rogers. “That’s bad economics,” he added.

Rogers argued that American International Group should have been allowed to descend into bankruptcy, and he feels the same about similarly situated businesses. It just doesn't make sense to divert money from healthy, prudently-managed companies and plow it into debt-burdened companies that are being run badly at best and criminally at worst.

Rogers has spent a career being one step ahead of mainstream investment thinking.  Amongst his many accomplishments, Rogers was co-founder with George Soros of Quantum Fund. During his ten years with the fund, the portfolio gained more than 4,000%, while the S&P rose less than 50%

Don't Have Time for the Super Bowl?

Commuting from one appointment to another yesterday I tuned in to the Dan Patrick Show in an attempt to catch some March Madness talk. Roy Williams, head coach of number one seeded North Carolina and one of the all time winningest coaches in NCAA basketball history, was being interviewed.

He was asked the poll question of the day which had something to do with "if you would miss the Super Bowl or not". He answered by saying yes he would, but that it may not mean much coming from him as last year was the first year in many, many years that he has watched the entire game. I was shocked as I thought the Super Bowl was the one sporting event that attracted even non-sports fans.

When pressed by Dan Patrick, Roy Williams explained that four hours is a huge block of time and that he cannot justify spending that much time watching a game when he has so many things he could be doing that time of year.

What became apparent to me is that Roy Williams is so busy pursuing his own dreams and goals, that he doesn’t have time to watch others pursuing theirs. No wonder some people are wildly successful and most aren’t even close.

I was reminded of a quote I keep on my desk:

“To give anything less than your best is to sacrifice the gift.” – Steve Prefontaine