Category Archives: Featured Posts

wealthstreaming, or snowflaking for income

skyline6

When my post on wealth ideas lost to I’ve Paid For This Twice Already in FMF’s March Madness Tournament, I started thinking about snowflaking. Snowflaking is a spinoff of the “snowball” debt elimination concept invented by Dave Ramsey but the snowflaking version of this concept has really been popularized by Paid Twice. In a nutshell, it’s making every attempt to generate income, however small, to apply to your consumer debt. The idea is that even tiny payments on principal make a disproportionate difference to the overall total amount paid when you consider interest.

But since I have no non-mortgage debt, and my mortgage is at a very low rate of interest, I’m not focused on debt repayment. Yet the concept can be tweaked and twisted and all of the sudden it makes great sense in my life and for my (multi-)million dollar journey. I’ll call this concept, for lack of a better word, wealthstreaming. And yes, I know it doesn’t make much sense, but I like the way it sounds.

I had one big stream of income until recently - my consulting work. I have other streams, too - interest, dividends, some web-based income, some (very minor) income from miscellaneous sources like commissions for landing new business. I like to think of all of these as faucets pouring into the same sink - the water’s coming through different sources but ending up going through the same drain (my family’s expenses) and the goal is to make the water pour through in such quantities that the drain can’t process it all and the sink overflows. Neat, huh?

So until recently the consulting income was a heavy stream. Now that I’m problogging for a while, that stream will trickle off (residual income comes in after the work’s completed). Some other income will hopefully pick up a bit - web-based income, referral income (bonuses from new work or recruiting other consultants) and even some other side businesses that I might work on (an e-book is in the works)! I have been doing quite a bit of studying of the coaching profession as well. My goal is to have the streams get heavier and heavier until they match the force of the consulting income stream, because then I can turn that faucet off, and not just for a trial run - for good.

The beauty of some of the streams is that I tapped someone else’s water line. Those dividends? No more work goes into generating those. I made the money, invested it, and now those companies just give me a check once a quarter. I like those streams. A lot. In fact, I want as many of those streams as possible.

Other faucets need to be kept open by my effort. The web income won’t flow unless I keep working on it. Referrals take a lot of work. Those streams are nice; not as nice as the streams from someone else’s line, but more fun and easier to generate than the one-hour-of-work-for-one-hour-of-pay consulting stream.

I try to learn new skills so I can widen the faucets or clean them up - or best of all, I can add another faucet to the sink. I’m picking up web design, slowly - hey, there’s a potential future stream! I am learning about investing in non-stock-market investments - ah, maybe rental income in the future? It’s hard work to develop the skills to add new faucets, but if you have 50 faucets all giving you a trickle it’s easier to maintain than one overstressed faucet creating a bottleneck because there are only so many hours in a day.

So that’s my idea - wealthstreaming, for lack of a better moniker. Adding tiny stream of income after tiny stream and seeing which one flows fastest. Not just concentrating on the big streams, but looking for the little streams that take no effort to maintain. What’s nice about the idea is that since I don’t have a grand idea - I’m still brainstorming the next Facebook or the next Digg - I can work on increasing my income today and not worrying about hitting a million dollar jackpot. I’ll just keep opening faucets until the sink spills over and I have more water than I need - because then I can share the water with my extended family, my friends and others.

15 ways to make your 9-to-5 a 10

 

I like to think of myself as being a step past the normal employee grind, but I still get up most days and schlep to my client’s office. Sure, I take off when I feel like it and work moderately flexible hours, but I do the lunchpail shuffle. I do know that there are changes that I’ve made over the past couple of years that have made a big difference in my daily life, and my Life, capital L. These changes make the day better and make me more productive - and, invevitably, have made me a little bit richer, too. They didn’t cost anything and didn’t take any great effort. Give them a shot:

  1. Get up early. If you are an early riser, the early hours of the day are probably your most productive. If you are not an early riser, you should become one. If you wake up 30 minutes before tumbling out the door you will be less likely to exercise, eat well, prepare a lunch or simply become alert before leaving. Set your alarm clock back 5 minutes before you go to sleep tonight, and do that every night for the next month. You will be amazed how much productive time this will add to your day.
  2. Stop smoking. I am not sure this needs much explanation, but if you are a smoker you are wasting money with that morning smoke-and-joe. I won’t even touch on the health implications; you’re wasting time and money, all for the sake of a stimulant you don’t need.
  3. Stop eating junk food. Eat protein the morning. Forget low-fat/low-carb/vegetarian/slow food etc.; the simple fact is that you will be perkier in the morning if you eat protein rather than carbs. Eating protein in the morning keeps you energized longer, makes you more productive and probably will make you eat less for lunch, too. Eat eggs for breakfast, or egg whites. No bagels, young Jedi.
  4. Exercise. Exercising gives you more energy, makes you happier, increases your stamina and if done correctly even makes you more creative. Running is a great way to brainstorm; leave the iPod at home.
  5. Groom. Spend some money on hair care products or hair cuts or razors or whatever you use to groom. Some people will tell you spending money on that type of stuff is not frugal. True, it is not; but you will not get ahead in this world if you don’t keep a presentable appearance. Think even rock stars roll out of bed looking appropriately rumpled?
  6. Hygiene. Like #2, this one explains itself. Nobody likes to be around people who smell. Wipe when wiping is needed. Spend a little extra on high-quality deodorants.
  7. Stand up straight. Confidence projects itself through your posture. If you slump and slouch and avoid eye contact throughout the day, you not only project an insecure, pathetic appearance to others, you feed your own brain an unhealthy diet of intimidated glances at your shoes. I make this mistake myself, sometimes, but try it. When walking in public, keep your shoulders thrown back, your back straight and your chin in the air. Walk like you own the sidewalk, and soon you will.
  8. Smile. As in #7, project happiness and you’ll make people happy around you. There is nothing quite as startling as a smile from a stranger these days. Don’t be creepy about it, but stop scowling. Put a smile in your eyes if not on your face, and you’ll see a change in people around you.
  9. Read/listen. If you commute to work - and chances are you do - make sure you make good use of that time. I know listening to the wacky Morning Zoo on X-Rock 103.6 may be the highlight of your day, but try to make use of that time. If you commute 40 minutes each way to work (the average US commute time) you spend approximately 9,800 minutes (163 hours commuting) each year. I spend almost 720 hours commuting per year! You can read a lot of books if you take public transportation, or listen to a lot of audio books on any subject (if you drive or take public transportation). Don’t give that time over to phone pranks and Rhianna.
  10. Eat lunch with humans. I know the frugal approach is to avoid the office lunch, or the “wasted time” with colleagues in the cafeteria - but even if you have to bring lunch for everyone once in a while to tempt them to stay in the company cafeteria, do it. Don’t spend lunch reading a book or gobbling a PBnJ at your desk. Get up and take a break for a few seconds!
  11. Take breaks. I have a terrible habit of “getting in the zone” at work and sitting without moving for hours, IMing and emailing and preparing documents. It’s a bad idea. Stand up once every 10 minutes. Yes, 10 minutes. Stand up when you take a phone call. Get a small cup for your water so you have to walk back and forth to the water cooler constantly. Breath. You are not chained to your desk.
  12. Leave early. Trust me. If you are working for an employer and complete what is expected of you for that day. Do not chit chat. Do not check your emails one last time - my guess is that unless the corporate servers are impounded by the FBI, your emails will be there tomorrow. “Forget” your Blackberry on your office desk as you leave for the day. Leave 5 minutes before you normally do each day. Nobody will fire you, I promise. Think anybody at Bear Stearns is keeping their job because they turned out the lights every night? No. Take that time in the evening for YOU, and building YOUR wealth.
  13. Do errands on the way home. Don’t wait until the weekend to run by the drugstore for shampoo (although you probably should be buying it from amazon or drugstore unless you’re clipping coupons). Get it on the way home. You’re already out. Save your free days for life - or better yet, for building wealth - not errands.
  14. Take off your shoes, wash your hands and shower when you get home. If you are like me and ride the New York subways, you probably have 8,000 different emissions and fluids and various unpleasant emanations on your hands and the bottom of your shoes when you get home. Take them off at the door, then go shower. You reduce the chance of spreading illness throughout the house by staying clean.
  15. Go to sleep early. Unless you have a thriving 24 hour business that requires your input at 1 am, chances are good that there is nothing “live” requiring your attention at that time. Go to sleep and get up earlier - you are more productive early in the morning than you are late at night. Let your evenings be for your family and for more positive productive activity - thinking, writing, making phone calls and reading.

Creative Commons License photo credit: Saveena (AKA LHDugger)

poor kid blues

I was rich as a child. Just kidding. I wasn’t. I lived in humble conditions in subsidized housing. My family was so poor we used the residual heat from cooking to heat our home. I had to share a room with my brother. I didn’t get a puppy. We only had one car, and it didn’t even have air conditioning! And worst of all, I didn’t have a Wii.

Now granted the subsidized housing was married student housing since my dad was still in PhD school when I was born. It was a cheerful, happy community with dozens of kids my own age. We did use heat from cooking to heat the house, but so what, why not? I never minded sharing a room with my brother - I assumed that’s how brothers were supposed to live! I didn’t get a puppy because I never really wanted one. We only needed one car because everything was close by, and most cars didn’t have air conditioning back then. And although I didn’t get a Wii, I did get a computer when I was 10 - a Tandy Color Computer - because my parents thought learning some computer skills could be useful if it ever managed to evolve into a useful device. Too bad computers never really took off, eh?

When I read the Science of Getting Rich, there was a passage that my wife pointed out to me that really struck me:

“Do not tell of the poverty of your parents or the hardships of your early life. To do any of these things is to mentally class yourself with the poor for the time being, and it will certainly check the movement of things in your direction. Put poverty and all things that pertain to poverty completely behind you. “

One of the memes of my financial life has been to proudly point out how my parents rose above their parents financially, and how I was rising above them (at least in terms of income - in terms of real long-term wealth they are still way ahead of me). This meme was always painted a massive struggle against near-impossible odds - primarily due to my big brain. I have been fond of telling people how I didn’t always have the big house and the big cars and the bling bling (does anyone still say that with a straight face)? I made it on my own! I never had STUFF! We lived in a SMALL PLACE! We struggled! We succeeded in the face of a harsh, cold world!

I got carried away again. It’s true that I didn’t have a lot of stuff growing up. Having a small apartment for four people restricts storage space. We never really lacked for much. I don’t think I ever saw a book in a bookstore when I was a kid that my parents wouldn’t buy for me if I asked. A toy? That they might deny. But I really can’t remember anything in retrospect that I felt I lacked. Maybe at the time I wished I had the Schwinn X22 bike instead of the X21, but I can’t recall it now.

A few points:

  1. Recalling your “poverty,” even for the sake of telling someone an inspiring up-by-the-bootstraps story, is putting a negative spin on your memories and a cloud over your future. Don’t remember your “lacks.” If you grew up in America, chances are good (although not 100%) that your “poverty” as a child was a lack of the coolest new bellbottoms.
  2. Think forward, not backwards. Your childhood was a launchpad for who you are today. Are you improving your health, your wealth, your finances and your well-being? If so, your childhood was rich, because it gave you the tools to improve yourself now.
  3. Talking about poverty will not make you rich, ever. If you spend time telling people about what you lack, you’ll continue to lack. If you don’t want to keep lacking stuff, go out and do something about it. Don’t whine about the poverty of your youth.
  4. When you are 20 years older today, do you plan on telling people those were the lean years? I bet if you read this blog or any of the blogs in my blogroll you don’t plan on that. You PLAN on telling people that these were the years you brought the booyah. The early 2000s were when I got my shiznit together! Think about 20 years ago the same way. Even if it’s not 100% true, doesn’t it make you feel better to think that way?
  5. Listen to rich people talk about their youth. Does Sergey Brin sit around complaining about being a Jew in Russia as a child, and having to emigrate when he was 6 years old?
  6. Two out of every three billionaires made their fortunes from scratch. Being rich as a kid means you are LESS likely to be a billionaire. That’s an amazing thought.

I try as much as I can these days to think of what I had, not what I lacked. Concentrating on the things you didn’t have then, or don’t have now, is a sure way to be miserable.

Creative Commons License photo credit: billy verdin

why be rich?



Some of the comments on my post on Friday (part 3 of my 31 causes of failure series, from Think and Grow Rich) made me think a little about how others might perceive my take on “getting wealthy.” I think “getting rich” and “getting wealthy” are two different things, but I blur the distinction in my writing. I’m approaching the list of causes of failures more from a goal/life perspective, and that’s the way I chose to interpret the book - but I don’t discount the “rich” part. Hill puts a substantial emphasis on getting rich but the second “rule” of getting rich is this:

“Determine exactly what you intend to give in return for the money you desire. (There is no such reality as “something for nothing.) “

If you get rich without an intention to give something in return then you are just a heartless machine. He even asserts that without a specific purpose built around giving back you won’t manage to become rich in the first place.

Hill and Wallace Wattles (who wrote The Science of Getting Rich, a predecessor of TAGR) both were emphatic that the purpose of wealth was to free up your life to achieve your purpose, and your purpose was to give back to the world in terms of charity or your talents or your knowledge. The failure to emphasize “giving back” is one of the reasons I am not as fond of new Law of Attraction works like The Secret. My idea of getting rich is so that I can become a better person, contribute more to the world and help others with my wealth - all while being happier with myself and a better provider for my family.

I like the idea of thinking as every action I do as something I can win. I can fight the battle to be more intelligent, or smarter about saving money, or become more successful at business, etc. I don’t think it makes me unpleasant - it’s not like I’m challenging people to arm wrestle me all the time!

Getting rich is important. You can do great things without getting rich. Gandhi wasn’t rich. However, for many of us the capacity to do good becomes significantly more pronounced if we do become rich. There are some caveats; you can’t work 18 hours a day and neglect your family to be rich. You can’t be the best stay-at-home parent in history if your spouse stays home, too - somebody has to earn money.

I have several very specific reasons I want to be rich, but one of the first and foremost is that I want to be a full-time dad, or at least one who spends more time parenting than working. Right now I spend more than 50% of my waking hours either working or commuting to work, and I am at the low end of time commitment for my profession since I’m an hourly-paid consultant (which discourages my client from keeping me for overtime). I don’t see any way to change that percentage without getting rich enough to not need to work (a lot). Someone who works a lot is not winning, in my opinion, they are losing. The trick is to work smart, not hard. Bill Gates is a good example - until recently the richest man in the world, he’s given $29 billion to charity, has three kids under 10 years old and is retiring early at the age of 53 later this year. That’s much more effective than someone who works hard, buys a Lexus and retires at 65 once his kids are gone from home. It’s also more effective than someone who drops out of society and lives an ultrafrugal lifestyle. The best way I can serve myself and my family and friends - and hopefully the world at large - will be to amass the resources I am able to and redistribute them in a beneficial way. Nobody will be served by high consumption or ultra-frugality. The best way to give back is to get rich.

So that’s just a small clarification. I don’t want to be rich so I can buy a Porsche. Travel to Italy? Yeah. Stay at home when I don’t want to work? Yeah. Support my extended family? Yeah. Have the means to give back to my community? Yeah. Buy a Wii, as so many of my frugal blogging compatriots aspire to? No. Getting rich is about removing money (or the lack thereof) as a barrier to my REAL goals.

Creative Commons License photo credit: aussiegall

a clear and present danger: the humanities

The US government currently has a debt of over $9.2 trillion dollars. In every measure of economic growth the US lags behind Europe and the emerging economic superpowers of India and China. At the same time, over $90 billion dollars will be spent in 2008 on financial aid. At least some of that money will go to pay for financial aid to students of the humanities, some probably at very expensive private schools. The economic policy of the United States encourages students to study any subject they wish, with no view to the ultimate goal - a return to society on its investment in the education of its citizens.

The increasingly dire economic situation in the US means it is time for action. The economic crisis is due in large part to spending on a war that, whether you support it or not, has far outstripped even the most wildly pessimistic initial estimates of its cost. It is also due to a lack of financial education in our citizenry that led thousands if not millions of people to believe that buying a house with a million dollar mortgage on a salary of $80,000 per year was not only possible but advisable. Many of these people would have benefited from government-subsidized finance or accounting college educations.

The average salary for a college graduate with a degree in English is about $30,000. The average salary for a college graduate with a degree in engineering can start at $68,000. Who is more likely to pay off a $40,000 student loan? Of course it depends on the individual, but the simple fact is that there should be some effort on the part of the government to encourage people to use financial aid to obtain degrees that result in higher-paying jobs; an employee who is paid more contributes more to the coffers of our nation in terms of taxes, productivity and usefulness of their output. The engine of our corporate economy is driven by the technical professions. Poetry will not win the war in Iraq.

In addition, the government should eliminate all financial aid for people who take more than 4 years to obtain a degree. They are delaying their entry into the workforce and thereby delaying repayment of their aid. They drain resources and attention away from the more capable and efficient students.

For these two reasons, the government must redirect financial aid to students who make the choice to (a) graduate as quickly as possible and (b) study science or engineering or math with the goal of obtaining a job with the maximum possible salary.

To me it becomes a question of subsidizing those professions that will help the United States remain the technological and scientific leader of the world. Private schools that value the humanities can dip into their endowments to reduce tuition for people who want to study linguistics, but as a taxpayer I want to see our nation’s universities churning out graduates who will get high-paying jobs and share the burden of high taxes with me.

The sole purpose of a university’s financial aid programs should be to churn out better, higher-paid employees (or better soldiers or technological innovators). There is no room for the pursuit of “thinking” in our schools. Those days are done.

(note: I am being sarcastic - I don’t actually think this at all)

(photo inflicted by Boris from Vienna)

so you want to be an international business jet setter…

Here’s an interesting look at my work schedule from about 7 years ago (I dug this up from my journal, which I’ve kept daily for 11 years now).

Sunday
- evening: Depart from New York, headed to Frankfurt

Monday
- morning: Arrive in Frankfurt, go to hotel, shower (European time is morning, but more like 3 am New York time).

- work a 10 hour day, assisted liberally by German jet fuel, er, coffee.

- evening: out late for drinks with colleague from Frankfurt office - beers in Germany - who knew?

Tuesday
- morning, afternoon: meetings with Frankfurt colleagues; separate off-site meeting with consulting team.

- evening: fly to Paris and its lovely airport, lovely late evening traffic, lovely chain-smoking taxi drivers, lovely $500 hotel room with paper-thin walls. Ah, vivre bien!

Wednesday
- morning and afternoon: meetings, meetings, meetings in grim lifeless Paris office - maybe one of the most humorless cities I have ever seen and my least favorite international destination (other than Brussels).

- evening: fly to Istanbul. Without opening my mouth I am mistaken by every single last person I meet as being Russian, not American - despite looking about as American as a blond, blue-eyed freckled guy wearing a Polo shirt and Dockers slacks can look in Istanbul.

Thursday
- morning: meetings at consultant offices (cramped and uncomfortable but with stunning views of Istanbul)

- afternoon: on-site meetings with local office.

- evening: hit the bars with consultants; any preconceptions about the lack of alcohol in a predominantly Muslim country are quickly swept away.

Friday
- lunch meeting, which I discover in Turkey means (a) more food than I have ever seen in my life and (b) work is more or less done for the day.

Saturday
- work, both at consultant’s offices and in my hotel - which sadly enough feels like a break when I’m still typing out reports at 9pm on a Saturday.

Sunday
- day off, (i.e. sleep and eat long lunch reading what sports news I can get my hands on in the hotel bar)

- late afternoon: flight to Warsaw. They serve peanuts (I am allergic) and I spend the flight wondering which would be worse, vomiting in the teeny tiny Polish airlines bathroom or passing out in the teeny tiny Polish airlines seat.

Monday
- meetings with Warsaw office in the morning - about 17 people around a conference table designed for 10.

- in the afternoon, met with officers from the Moscow office who happen to be in Warsaw (which makes me irritable since it removes any reason for me to go to Moscow within the next few weeks and I love Moscow).

Tuesday
- morning, fly to Bucharest; spend day at work and evening in local sports bar (befriending Romanian bartender), moving on to a casino (still in the hotel - I am unwilling to attempt Bucharest proper most of the time due to roaming packs of wild dogs and a predatory look in the cabbies’ eyes when they see Americans get in the cab).

Wednesday
- 14 hour day; return to local sports bar where friendly bartender, in the spirit of Romanian-American friendship, provides far too many free glasses of tuica for an American unaccustomed to it.

Thursday
- take 14 hour flight from Bucharest to New York wishing tuica were not so strong. Plum booze. Argh.

Friday
- back at work at corporate headquarters in New York - file expense report, file memos on trip, meet with boss, start planning next trip.

That’s 5 international cities in 10 business days (12 days total). Most of the days tended to include approximately 14 hours worth of “work”. That might mean 4 hours of meetings, 4 hours of email/calls to New York HQ, and 4 hours of report writing either in the office or in the hotel room. I usually took a break for 2-3 hours starting at 7 or 8 for a trip to the hotel bars (which tended to be quite fun, filled with other business travelers and local cheerful bartenders and waitresses), then return to my room for another 2 hours of work before collapsing. I saved the drudge work for those last two hours - updating my assistant on travel plans, filing expense report info, dealing with the non-technical emails, formatting reports (gotta get the TPS just right).

I took a step back from that lifestyle, and as a result here’s my schedule. The hours are long mainly because my client’s about 1.5 hours from my home.

Monday: leave for work at 8, home at 7.
Tuesday: leave for work at 8, home at 7.
Wednesday: leave for work at 8, home at 7.
Thursday: leave for work at 8, home at 7.
Friday: leave for work at 8, home at 5:30 (skip out early).
Weekend: I have worked one Saturday in the last 3 years (and that was at home).

I look back and think that my previous schedule was certainly glamorous from outward appearances. I was the very definition of a jet-setting businessman. I had an American Express Corporate Card and no limits on spending. The horrific demands of traveling (physical, mental and emotional) meant that the company was willing to make every single last creature comfort available, because otherwise people just wouldn’t do it. I didn’t mind so much because I was single (and likely to stay so, with my “2 weeks in New York, 2 weeks overseas” schedule. I never understood how the people who were married with kids tolerated it. Now that I’m married with one child (and another on the way) I couldn’t tolerate it.

So if you’ve ever wondered what a big-shot corporate international travel itinerary looks like, ta-da.

learning how to let go

When you look at a mug, do you see a mug? Or do you see a gift from grandma, a souvenir from that charming bistro in Paris, the cup that your daughter used for her hot chocolate when she was little? Whether you see just a mug or an object that emits memories probably makes a big difference in the level of clutter in your life.

Here are a few key points about sentimental attachments to “stuff.”

1. Stuff is not memory-magnetic. If you still own a childhood teddy that your father gave you, you probably tell people it has “memories attached to it.” It doesn’t. If the bear is given away to the neighbor’s kid tomorrow, your memories will not disappear.

2. Stuff packed away in boxes is not sentimental. I have a couple of keepsakes, knickknacks, doodads, etc. I have my Star Wars baseball-style cards from my childhood. They are in a box in the garage. If someone threw them away tomorrow, I wouldn’t notice for years. If you pack something away in a box and never take it out, you aren’t sentimental about it.

3. Some of the things you keep are not attracting good memories. If you have something that makes you sad, but you hang on to it because you feel it had some significance in your life, you aren’t doing yourself any favors.

4. You can’t take it with you. I guarantee that within 100 years either your stuff or you will be gone. You’re leaving your stuff behind sooner or later, my friend.

I like my stuff. I like my childhood toys. But I don’t like clutter. Something has to give at some point. That collection of Star Wars cards is one more shoebox packed in one more big cardboard box taking just a little more storage space out of the garage and making me grumble that we have nowhere to store the megaboxes of diapers. So what to do?

1. Be brutal. Throw out stuff. You may be tempted to put it in a pile ‘for donation’ or ‘for the neighbors’ or ‘for my future grandchildren.’ Unless you go directly to the Salvation Army right after assembling a pile of unneeded memorabilia, toss it. I know that’s not the environmentally sound thing to do, but we are on a mission, my comrades.

2. Be honest. If you have a sentimental coffee cup, fine. If you have three… OK. If you have 16, you might want to winnow down a bit. You don’t need 16 coffee cups.

3. Take pictures. If there’s something you don’t need, but you want to remember it, take a picture. Put it in a screensaver. You’ll see it, the memory will trigger but you’ll still have less clutter.

4. Sell it. If you can move promptly - see rule #1 - sell your stuff. You may love that 1964 “I Love Lyndon” coffee mug but face it - wouldn’t you rather have the $8 it could fetch on eBay?

5. Just refuse it, baby! The next time you go on a trip to Cabo Wabo, don’t get the “I partied with Sammy Hagar” memorial tequila shooters. Take some pictures instead.

6. Put it in circulation. I have about a dozen nesting dolls I brought home from Russia. I treated them like they were holding the Hope Diamond for a while. Then I suddenly realized that Little Buddy would get a lot of fun out of them. I have a twinge thinking about them breaking, but then again it’s not like I’m going to forget I lived in Russia. If you have wedding china, use it! If you have an antique chair, sit in it!

I am a sentimentalist. I fall somewhere in the middle of the scale between Mr. Spock (emotionless rejection of all sentimentality) and people who keep their cremated pets in urns. I do, however, try to eliminate the least sentimental pieces I own, and more importantly to minimize the new ‘stuff’ I buy during ‘a moment.’ Learning to let go isn’t easy - but we have to do it.

developing a millionaire mindset

When I stated my goal a while back to have $2 million dollars within just a little more than 9 years, I realized that I had to make a few changes in my thinking. I am still working on most of these changes, but I have come up with a few targets.

1. I can’t keep all of my savings in retirement accounts. I have a lot of money in IRAs (for myself and my wife) and my 401(k) that aren’t touchable without penalty until we reach age 59 1/2, and that’s too late if we retire (in my case) more than 10 years before that. Even though we have a fair amount saved in non-retirement accounts (about 30% of our total savings) we probably will need more than that.

2. We’ve got to say goodbye to the expensive metropolitan New York area. Paying almost 6% of my income in property taxes every year is not a good way to build wealth. The cost of living hits you nonstop in an area like this: from $15 per day in commuting costs to $50 monthly water bills, living near New York is just too expensive.

3. My wife and I need to be firmly on the same page. As I’ve pointed out in a guest post elsewhere, I mentally flip flop from goal to goal. Bubelah is a lot better at staying fixed on a goal, but she still changes her mind from time to time, too. We have to continue to stay focused on a very definite set of goals, and not suddenly decide this week that we should look into alpaca farming in Mexico, because it’s just not compatible with our goals, our skills or our interests in the long run.

4. We have to find a place to live with a solid school system. I have realized that sending children to a private school is a recipe for financial disaster. For some people private school may be the only choice, for religious or personal reasons. I would rather identify an area with great public schools rather than send my children to a private school simply because of the area I live in. I would rather change the area than spend an additional $12,000 per year on a school that - most likely - is no better than a good public school in a different area.

5. My mindset has to change from “save more” to “make more.” I have done very well for the past few years, with Bubelah’s help, at saving more. However, if you make $100 the most you can save is $100. If you want to save $110, the only way to do it is to make more money. I need to find more ways to identify alternative income. I need to quit thinking how to save an extra $50 per month and start putting that effort towards making an extra $50 per month.

6. I need to identify (and maintain) a master mind. I first became aware of this concept by reading Napoleon Hill’s book “Think and Grow Rich.” Wikipedia has an excellent article which includes a discussion of the master mind, but at its core, to me it means that you have to associate with people who have the same mindset and goals as you do. You need people whose interests complement yours, but whose skills fill the gaps between your own. A good example of this would understanding taxes. I know just enough about taxes to think I could be an expert, but I’m not. Should I learn more about taxes, or get someone in my master mind who already knows more? You can’t know everything. You should have a firm grasp on the basic principles of any subject important to your goals, but you should also have a team to rely on for assistance, and also be there for them when they need to rely on you.

I feel that reading blogs and forming connections with other people over the Internet is one part of this effort - I like to consider most of my blogroll as part of an online master mind. Another part of the effort is taking a cold, hard look at people who don’t add to this effort. Anyone who belittles your goals or disparages them cannot, by definition, be part of your master mind. Spending time with them has to be considered to be in opposition to your goals. I’ll talk more about that in future posts, but that is a scary concept that most people aren’t in a hurry to embrace: people who are close friends and family may be keeping you from achieving your goals, and you have to distance yourself from them if you want to achieve your goals.

…

I think all of these steps are doable. In 2007 Bubelah and I formulated our plan and started taking steps toward achieving it; in 2008 we plan to make even more substantial progress. What the mind can conceive, you can achieve.

(photo by Citizen L)

net worth or net worthless?

Having been involved in several conversations about the calculation of net worth recently, I’ve come to the conclusion that net worth isn’t that important to know. The reason? Net worth is a very difficult number to analyze, and the difficulty in analyzing it makes it a somewhat worthless tool for measuring progress in your financial life.

1. You don’t know how it’s calculated. A lot of people include home equity in that calculation (value of the home less mortgages/loans against it). I don’t include it, because I believe that it’s not a value you can “cash in.” If you cash it in, you still have to buy a new place to live. The only way to “cash it out” is to sell and then move into a rental or downsize, which is not a typical move most people make these days. The counterpoint is that it is an asset that you can borrow against; a bank will give you a loan against that value. Regardless, you just can’t know if people include it or not.

2. A net worth of $200,000 means different things in a small town in Texas and in La Jolla, California. In one place it’s a substantial amount that could generate a sustainable income. In the other place it’s lunch and a tip. Many of us may know that we’re staying put our whole lives, but many of us might be living practically anywhere in 20 years. Knowing whether you’ll be living in Smallville or Gotham would make a big difference.

3. Net worth doesn’t accurately measure cash flow generation. If you have an asset (a rental property, etc.) that generates cash flow, is that worth the same as one that doesn’t (like bricks of gold or a non-dividend paying stock)? In the long run, of course, that cash flow adds to net worth, but the potential future accumulation of cash isn’t really represented in a snapshot view of net worth. That’s not the purpose of a net worth calculation, but it is a problem with analyzing it.

4. Net worth also doesn’t show risk. If I have $500,000 invested in equities, is that the same as $500,000 invested in a money market? Again, for a snapshot in time, yes, but one of them is substantially riskier than the other. If you could apply some sort of risk calculation to your holdings it might make a difference in how you look at the overall picture, as well.

I don’t think it’s all that important to know your net worth. If you use it for motivation or simply feel better knowing what it is, by all means do so. But just like knowing that Harold weighs 200 pounds isn’t that helpful in getting a picture of him unless you also know whether he’s 5 foot 3 inches or 6 foot 8 inches, or whether he’s solid muscle or flabby, knowing your net worth doesn’t tell you everything you need to know about your financial position. It’s part of the picture, but definitely a small part.

…

This post was inspired by Moolanomy’s net worth writing project. Here’s what other people who participated are saying about net worth:

…

Note: Just because of the busy holiday weekend, guests, etc. I fell behind on my blog reading so I didn’t have many starred for a link roundup. I participated in two carnivals this week, and hopefully I’ll get through those and have a few links from the carnivals and my general reading by Saturday. Also, Emily was the winner of the “mystery CD” and I’ll leave it up to her to disclose what it was when she gets it.

2017 is the year of the bimillionaire

In 2017 I will be a bimillionaire. Not content to be a simple millionaire, I plan to have $2 million in the bank. I have some good reasons for that date - although it’s flexible - and that number - although it, too, is flexible. I am also not particularly gung-ho to be rich, either. I don’t envision that as my ticket to buy a mansion or start rolling with A-Rod, even if he was still a Yankee. No, the reasoning is that with that much money socked away my family’s lifestyle could 100% detach from any concerns over money. The interest off that capital would mean that none of us would have to work at anything unless we chose to, which is the “mission statement” of several of my favorite books and blogs:


My intention, therefore, is to figure out how to get there. I’ve already achieved the goal, mentally, which in my book is about 99% of the battle. You may think that is strange but I’ve seen again and again in my life that this is true. There are certain external events that cannot be controlled. However, that is exactly the point - they cannot be controlled or predicted with any degree of certainty, so I do not bother to do any “what if” planning. I prepare for the unexpected (emergency fund) and protect my family (insurance) but I can’t, for example, make savings plans which include a provision for an invasion of Ukranians or, much more ominously, Urainians. So once I’ve determined that this is the goal, AND mentally decided it’s achievable, the only question will become how I will get there.

I’ll give you a parallel. If I decide I will lose 25 pounds this month, it’s doable. Not in ways that won’t destroy my health, though. I could starve myself, develop a heroin habit or cut off my head. I can pretty quickly eliminate those means. Yet if I decide I will lose 5, I know it is doable. I have done it before. The only question will be whether I decide to do it or not. This is at the heart of visualization. This is not the hocus-pocus dreaming visualization of The Secret. This is the firm determination that you have to pass that test; to lose that weight; to get that job; to run that last mile. You take control of the doubts, fears and inner naysayers and just get on with the task at hand.

So I am close to being partially on the way to being a bimillionaire, give or take a few percent. I’m not counting the value of my home (which I never do - I assume if I sold it today I would get $0 profit, just to be conservative). I have estimated how much I need to save each year and what rate of return I need to get there, and realistically it’s not happening that way unless the market skyrockets for the next decade or I sock away 50% of my income. My thinking, therefore, is on alternative income, and more importantly how I can detach my earnings from my presence.

It’s been beaten to death that you can’t earn money in most jobs without your physical presence, so to speak. If you show up and work and earn money that way, there’s a limit to your earnings. You can’t come in on the day between Saturday and Sunday and put in some overtime. You can’t work 3 shifts. You can’t clone yourself - Michael Keaton tried it and it just got weird. The goal, therefore, has to be getting someone to make money for you, or creating something that earns while you sleep.

I plan to take some current ideas of my own, mix them with other people’s ideas, throw it in my mental oaken cask and pour out some great vintage ideas in a few days or weeks or even months. I have minimal alternative income right now, but I think there are so many possibilities out there that the only obstacle is me. If I don’t have the determination to keep working on my blog to write more interesting or more viral stuff, if I keep thinking my novel ideas are silly or if I don’t believe anyone would buy the gadget I’ve toyed with making, then I’m not going to be a bimillionaire, and it’s my fault. If I try any of those things and they fail, then the only person who will stop me from trying again is - you guessed it - me. There are no ‘No Second Chance’ police.

Don’t assume that this is all about money! It’s about achieving personal goals, one of which is having the time to seize back my life from corporate America. It’s taken its pound of flesh from me. Actually it’s taken its pound of flesh, fried it and served it with scrambled eggs. Right now my house is basically owned by my corporate clients - if they decide to quit making payments, so to speak, I’m cooked. So I want to get out from under their thumb. You can do the same thing, even if you’re starting under a pile of debt. We all can. To quote my favorite self-help author, “What the mind can conceive and believe, the mind can achieve.“

rich mom, poor mom

My ‘poor’ mom believed that by working and giving me things she was doing the best she could for me, even though it meant I was raised largely by daycare and babysitters first, then after-school programs later. She loved me as deeply as any mother loves her child, but she made her career a priority, spending 50+ hours a week away from me. She did this thinking that was the best way to provide for her family.

My ‘rich’ mom stayed at home with me, participated in my life and gave me the best care she was able. My rich mom couldn’t always buy me things. Other kids had DVDs and Wiis and iPods. We had board games and the radio. My rich mom was just as smart and educated as any working mother, but she made her children a priority, knowing that nothing else would matter more than them in the end. She did this thinking that was the best way to provide for her family.

Robert Kiyosaki, in his famous (infamous?) book Rich Dad, Poor Dad, laid out the idea of having had “two fathers” who taught him different lessons about life. One (his biological father) taught him that hard work, a good job and lots of education were the keys to success. The other (his best friend’s father) taught him that hard work, investing your money in assets and frugal living were critical. The former, the “poor dad”, was wrong, and the latter, the “rich dad”, was right - according to Kiyosaki. Interestingly enough, Kiyosaki focuses solely on the money lessons of his fathers. So let’s be sexist for a minute and say that the father represents the “outside” world - money, work, achievement. Let’s imagine that we could frame the same rich vs. poor argument for moms - but in terms of the family and its emotional life.

Quick disclaimer: in this article I use the term ‘mom,’ but it’s not meant to be sexist. The ‘mom’ below could just as easily be the man in the family, and I always want to point this out. I plan to be a stay-at-home dad sometime in the next ten years, once we are financially independent. So substitute “parent” for mom and you’ll get the idea. Rich parent, poor parent just didn’t have the same ring to it.

Rich Mom, Poor Mom

The rich dad taught Kiyosaki that frugal living was key. The rich mom agrees with this thinking. Making sacrifices so she can stay home is at the core of the rich mom’s philosophy. Her “investment” of time in her children now will pay off later. The poor dad thought that you made money to spend money on liabilities, like cars and expensive gadgets and money-sucking homes. The poor mom thinks that her children need more money - more than they need her.

The poor dad believes that education is a requirement. The poor mom thinks that the school system is the most important part of a child’s development. She chooses to overlook the fact that schools are only responsible for teaching subjects. American schools long ago learned that values, character, financial intelligence, morals and even physical fitness were toxic areas that caused lawsuits. Teachers are too overwhelmed by bureaucracy and huge class sizes to spend time with individual students. The rich mom knows that the schools are an important part of a child’s development, but having a good character starts with lessons at home… and a good character will take the child farther than 8th-grade botany.

The rich dad believed in investing money in assets and letting those assets earn money for you. The poor dad believed you should work to enrich your employers and hope they would provide for you when you could no longer work for them. The poor mom hopes that others will raise her family (the husband and children!) while she works. She hopes that after she’s worked through her children’s formative years that they’ll come out OK. The rich mom knows that there is only one sure way to do a job right - to do it yourself. The rich mom knows that when she is 90 years old, struggling with health and money issues, that her children will come to her aid, but that company she gave 75% of her waking hours to will have long forgotten she existed.

I think in Kiyosaki’s book, one of the best lessons is his concept of the true definition of an asset. An asset makes money for its owner. A liability loses money for its owner. A house is, by that definition, not an asset if you live there. Everyone needs a place to live, for sure, but it IS costing you money. An asset is a house you rent to someone else at a profit.

In the same way, the rich mom understands that children are an asset, not a liability. If you think of what having children will mean in terms of loss (losing free time, losing independence, losing a career, losing your own youth) then they will be liabilities to you and you’ll be a poor mom. If you think having children will be a GAIN (the joy of watching them grow and learn, adventures that give you a chance at a second childhood, the knowledge of leaving the world a better place with these new people in it) then you will be a rich mom. With the rich dad and the poor dad, there is no physical or mental or any other sort of difference between the two men. They make choices. In the same way, every parent - male or female - has the ability to be a rich mom or a poor mom.

things I learned from my grandparents about money, part 2

In an earlier post, I covered some lessons I learned from my maternal grandparents. To continue, I am going to cover some of the lessons I learned from my father’s parents. They have both passed on, but I certainly have learned from some of what I perceive to be their mistakes and successes in planning my own financial life.

As I said in my earlier post, I realized a long time ago that it is very easy to pick out the flaws in other people’s philosophies or actions while failing to recognize them in your own thoughts and actions. However, I still find it a useful exercise to try to determine where people make good decisions and bad decisions. Even more important is trying to understand the ‘why’ behind those decisions.

My father’s parents (my grandparents, both now deceased) were never terribly frugal. My grandfather had a limited formal education. He fought in Europe - against Germans - in World War II, which must have been wrenching for someone from a Germanic culture like the Pennsylvania Dutch. He went on to work as a sign painter. My grandmother was a kindergarten teacher. They were never rich by any stretch of the imagination but from spending time with them in my youth I never perceived them as poor, either. They owned a home in Tennessee and lived a lifestyle that would not classify them as anything but a typical middle class American family – cars, a yard, two children, a TV, meat and potatoes.

Here are some of their views towards money that I think are interesting, both good and bad, and my take on them.

  • Traveling, good and bad. My grandparents loved to travel. Their favorite destination was to return to Pennsylvania for my grandfather’s Army reunions. He remained extremely close to his fellow soldiers his whole life, although he seldom spoke about the war. They traveled frequently throughout their lives, and often seemed to spend more on their vacations than most people would think prudent. I have some mixed feelings about this, because the point of life is to live it, of course. If traveling is an important aspect of your life, then it may not always be an indulgence.
  • Moving to Florida, bad. When I was approximately 11 years old, my grandparents very suddenly announced to the family that they were moving to Florida. I am not sure of the details of the adults’ conversations at the time but my impression was always that this took everyone completely by surprise and I think they had already sold their house when they announced this move. They bought a condominium and moved a long way away from my father and his brother, as well as most of their friends and family, with the exception of the few who lived in Florida who had persuaded them to move. This meant that very abruptly I went from spending 50% of my grandparent-visiting-time with both sets of grandparents (since they all lived in the same town) I suddenly saw my maternal grandparents about 20 times for every one time I saw my paternal grandparents. My maternal grandparents were a few hours’ drive away, while my paternal grandparents were a plane flight away.
  • Entrepreneurial approach, good. Almost all of my extended family is made up of ‘good company men.’ I do not mean to say this in a disparaging way. My grandparents on both sides were children of people who worked the land and saw careers in education or government service as large steps up in life. Few of them, coming from farming backgrounds, ever expressed much interest in ‘going it alone’ as an entrepreneur. They might have had a warped view of the risks and rewards, since a farmer’s work is exceptionally hard and the returns minimal. My father’s father was really the only person I had much close contact with as I was growing up who had not been a lifelong employee. I never talked to him much about his business, and now that I’m older I regret that. The small amount of exposure I got to that lifestyle, though, taught me that entrepreneurs are able to work, save and retire just like an employee. He wasn’t able to turn his business into a fortune, but he still did well enough.

Those points are just highlights. The important lesson to remember is that anything your family or your friends teach you about finance is valuable. Sometimes you may learn by avoiding their mistakes, sometimes you may learn by taking their advice to heart - but it is all learning. From my maternal grandparents, I learned to save and to avoid debt. From my paternal grandparents I learned to spend some money, at least consider working for myself and also to be wary of moving too far from my family. In fairness, the latter lesson is something I still struggle with, since without my own parents’ willingness to move closer to me I likely would still be far away from most of my family (albeit close to my wife’s). As I get older, I realize that this is a critical component of happiness.

I think it’s healthy to look at your family’s views on money. We are just a collection and a refraction of the sum of our ancestors in many ways. I will cover other friends’ and family members’ views towards money in the future.

1 2 3