Giving

There are times when I wonder why I do certain things. Today I had one of those moments. I was waiting with a small to start our morning run when a man pulled up and started talking to us. He quickly singled me out and started telling a wonderfully heart wrenching tale of personal troubles after which he asked for money. And then I gave him the money. Actually, I gave him more than he asked for.

As the day has progressed, I have considered why I gave him the money. Ultimately, I concluded that it just doesn’t matter that I gave him the money. What matters is that I believe I did a good deed. I helped someone in need. Yes, he could have been lying about his problem. But, really, does it matter? It doesn’t. And if he was then that is on him. As for me, I believe that when I chose to help someone, that choice will be returned to me tenfold. I may not know when or how, after all, I’m not keeping score here. It just seems to always work out for me.

That is what giving is really about. Giving should feel good, like you know you’re doing the right thing and that someone or something else will benefit from what you have done. Give it a try and see what happens to you. Give something away, be generous. The results might surprise you.

Patience

It is easy to make a decision to change something in life and often difficult to follow through with that decision. The difficulty in follow through comes not from the need to act, rather it is the ability to maintain the action that facilitates the desired changes. For example, if the decision is to lose 10 pounds, well that’s easy. Now you must act on the decision, so you change your diet to reduce carbs. Most often times not much happens immediately and there are no real results. It can take several weeks or even months to see the results of the change in diet. The same is true with exercise, it takes time to see the results of increased exercise.

 

The question is how to maintain the action over the long-term?  I believe there are three factors that must exist for change to be sustained for the long term. First, there must be a real desire to make the change. One must believe that the change is for the greater good. Second, the change must be for the individual. If it is not for the individual not change can be sustained for the long-term. Third is a psychological piece, there must be some small wins or evidence that there is progress. If there is no evidence of progress, then it is too easy to revert back to the old state.

 

One of the best ways to start a change that can be maintained over the long-term is to start small. Think of it in the smallest possible increment and act on that. By using the example to lose 10 pounds, which could be challenging, what would happen if I reframe the thought to simple stop eating candy. It might help the process and I don’t have to stop entirely, I just need to stop for today. If I can do it today, then tomorrow, then the next day and so on. I have begun to change. Then after that is comfortable and the new norm, I can add to the change. By not eating candy for a day, that is my win. The win must be recognized and rewarded by acknowledgement.

 

Making changes and sustaining them is really a process of decision, action, and recognition. Change takes time and needs to be nurtured. Be patient with changes.

Believe and achieve

The saying is that one will achieve what one believes. I really believe this is true. So, if you regardless of what you believe, it is possible to achieve. One just needs to take the steps necessary.

 

There are many examples of how this works. One example, if you want to be debt free you need to first believe it is possible to be debt free. Once you believe, then you will take the necessary steps to achieve it. You might stop going out to dinner or you might get a second job to increase your income. Anything is possible once you believe it to be possible. That is truly the first step to success.

 

Another example is if you want to run a marathon. First you need to believe it is possible, then you will begin training and doing the things you need to do to make it happen. You may even hire a coach.

 

By the way, hiring a coach is not a bad idea. They provide a lot of good information and teach you how to do what it is you want to achieve. Coaches provide information on best practices and new theories. However, you have to do the work. For most of us there is no pill that will deliver immediate results. It always takes work and effort to achieve anything of importance.

 

I want you to consider what you would like to achieve by the end of the year and see if you can actually do it. I will caution you to make it realistic. Something like payoff the car or run a marathon or take a college course. Try it and see.

 

You can achieve what you believe.

Breakup

It is finally time. Time to end a long-standing relationship. I have finally decided that the relationship has not been in my best interest. As a matter of fact, I think this relationship has been terrible. What relationship you ask? I am ending my relationship with FICO.

I have decided to let FICO go out of my life. I will no longer care about credit and credit scores. You see, I just don’t need to borrow money and pay large sums of interest to banks and lenders. I know that like in all breakups friends will be forced to choose sides and that is okay. If you choose to remain friends with FICO, it will be okay. All I ask is that you don’t ask me to keep inviting FICO into my life.

I have come to the realization that if I cannot pay cash for an item, vacation, whatever; I simply don’t need it. I can wait until I have the cash to make the purchase. And I am okay with that idea. I only needed FICO to get credit so that I could improve my FICO score. That makes no sense. It has been a terribly one-sided relationship which resulted in negative consequences for me. There was no need to keep paying today for yesterday’s purchases. And I won’t do it. So, there it is, goodbye FICO I wish you well and hope you have a good future somewhere else.

Now, I know this won’t be easy for me. I will need to change a lot of behaviors and possible develop new friends. But, in the long run I know it is the best decision and in my best interest. I have a few things which will linger in my life a keep FICO around and involved. Things like a car payment and a mortgage, which still need to be paid off. However, I will not let that keep me from moving forward into a better future without FICO.

Goodbye FICO it is time to part ways.

Rent or Buy

Several years ago, I realized that I could save money if I stopped paying for services and equipment that wasn’t necessary. An example of this is the local service provider was charging $10.99 per month for the use of a Wi-Fi router. After doing some research, I learned that I could buy a comparable Wi-Fi router for about $99.00, which I did. Forty months and two moves later I am still using the same router. I think that was a reasonably good investment, but let’s look at the numbers.

This is a good place to look at the return on investment (ROI). Return on investment in this case is a calculation the indicates how long it takes, in months (or payments) into recover the original investment. The investment was $99.00 to purchase a Wi-Fi router. The rental price was $10.99 per month to use the service provider’s Wi-Fi router. Therefore, the ROI calculation $99/$10.99 = 9 months. That is a great ROI.

The investment also generated a monthly saving of $10.99 + taxes but let’s ignore the tax. The savings generated by purchasing and using the router are the number of months times the cost per month less the investment (40 months x $10.99 monthly rental – $99 investment). The savings to date has been $340.60. Which is not bad for a simple investment such as this.

The ROI calculation is a great tool to use when trying to decide between options. You always want to go with the option which has the best ROI. In this situation the options were to rent the router or own the router. Because there was a high probability of using the router for more than nine months, it was logical to make the investment to own the router. Had the usage duration been less than the nine months it would have been better to rent the router.

There are other money savings options in our daily lives which we should consider. Take some time and look for one or two. It might not seem like a lot of money initially, but over time, all those little numbers add up to one really big number.

Asset or Liability

One of the most recent concepts that I have to considered  is deciding whether whether to classify something as an asset or a liability. For example, what is a house, an asset or liability? I think that is a good question to ask and clarify.

 

My understanding is that according to Robert Kiyosaki, author of Rich Dad Poor Dad, an asset is anything that makes money or produces revenue and a liability is anything that costs money. So what is a house? Based on the definition above, a house can be either an asset or a liability. If you rent the house or use it for business purposes therefore it generates revenue, then the house is an asset. However, if the house is a residence and lived in and has a mortgage payment, then it is an expense and therefore a liability.

 

It might be a difficult concept to grasp, because we are often told that a house is an asset. And in a sense it is, because it is worth money when it is sold. When a mortgage is issued on the house, the property is then owned by the mortgage company and the occupant is paying rent or what is often referred to as a note. Therefore the house is an asset to the mortgage company, because it is generating revenue; and a liability to the occupant, because it is an expense and the occupants are making a payment.

 

What about if there is no mortgage on the house? Same rules apply, if the house generates revenue it is an asset, if not it is a liability. Again, for the occupant the house is a liability because of the expenses associated with living in the house. If the occupant is a renter, then the renter makes a payment to the owner. For the owner the house is an asset, it generates revenue; and for the renter the house is a liability, it is an expense. If the owner lives in the house, then the house is a liability because it does not generate revenue. This is because the house only creates expenses for the owner in the form of insurance, taxes, and maintenance costs.

 

Using the definition above it is simple to determine if something is an asset or a liability. If the investment generates revenue, it is an asset; if not, it is a liability.

Sunk cost

I have noticed that we frequently let past decisions keep us from future opportunities. Let me explain what I mean by that statement. We worry too much about the ‘sunk cost’. A sunk cost is when you have already spent time or money, which can never be recovered, on something. I like to include them in the definition of sunk cost, primarily because time is a resource that once spent is gone forever.

An example of a sunk cost is you bought a season pass to a swimming pool. You can never recover the money spent on the pass, all you can do is utilize it to maximize your enjoyment. The money is gone, regardless of how often the pass is used.

One of the most common statements I hear goes something like, “We spent $xxx to do ____, so we cannot do ____.” Now if you fill in the blanks the statement might be, “I spent $10,000 on the car, it is now worth $7,000, so I cannot sell the car because I cannot get what I paid for it.” This is the sunk cost syndrome. We might be clouding our decision making by hanging on to the sunk cost. Maybe the outlook needs to change too, “I can get $7,000 if I sell the card today.” The idea is to not worry about what you spent but to focus on what you need to do moving forward. Another way to view this is to ask, would you make the same decision today?

Sunk cost syndrome creates a situation where we are hesitant to change direction or consider alternatives that had we not worried about the past decision the choice would be simple as well as different. I would suggest that when considering options try to avoid the sunk cost trap and don’t let past, unreversable costs stop what you have planned for the future.

Stop Living in the Past

For all of you who are holding onto the past, it is time to let go, release, and free yourself from that bondage. Living in the past can take many forms, so here are a couple ways that we lived in the past and possible ways to let go and start living for the future.

Debt

When you are in debt you are definitely living in the past. Debt is paying today for what you did yesterday or in the past. This is a terrible way to live. Why would anyone want to pay for yesterdays dinner, tomorrow? So here is how to break the cycle… If you cannot pay for it with cash, DO NOT DO IT!!! It is that simple. There are plenty of free activities to do in every town and neighborhood. For example; I run, usually about 5 miles. This will take me about 45 minutes plus time to warm up and cool down. It cost me nothing and I get some much needed exercise. I also eat most meals at home. These meals are usually healthier and cost less to prepare. Plus, I have a lot of food at the house, which, if I don’t eat will just be thrown in the trash. Make coffee at home, it is really expensive to go to the coffee shop. Watch movies you already won, read a book, get to know your neighbors, sit in a lawn chair and enjoy the afternoon. Write a letter to a friend (not an email). There are many things to do that cost little money to do and give a sense of fulfillment. Getting out of debt is really about changing habits.

Relationships

Many of us hold on to past relationships. This is a tough one, but you cannot move forward if you hold on to the past. Let it go and move on. If you have difficulty, seek professional help. But really, some relationships are not good and never were, so let it go and move forward to a better relationship and a better life.

Clean out the old

This is a fun one and can actually create some money. Have a garage sale or sign up for one of the apps to sell old stuff. A good rule of thumb is, if you haven’t used or worn it in 6 months, get rid of it. You can donate to your favorite charity or Goodwill or sell the items. I recently sold a lot of stuff and was happy to see it go. I reduced the clutter in my life by doing this. Some things you will want to keep for sentimental reasons, be judicious about this and simply keep the things that really matter.

Ultimately, when you clean out the old stuff you make room for new and possibly better. This is true of relationships, furniture, etc. So, is it time for you to clean out the old? It was for me.

Make a decision

Sometimes we spend too much time waffling back and forth about a decision. This is generally referred to as procrastinating. And often we view it negatively. Sometimes it can be good to take time to make a decision, while other times it is best to just decide and move forward. Now let’s consider a when it is good to take time to make a decision, when it is good to be quick and what might help speed things up in the decision making process.

Slow decision time….

It is often good to take time to make decision which have long lasting impacts on you and your family. This might be decisions about buying a new car, making a career change, having children or moving to a new neighborhood and possibly which school to attend. Basically, these are all items which are difficult to reverse or undue. This is when it is good to take a deep breath and evaluate what it is you really want or need. Try to keep the emotion out of the equation. An example is buying a new car. Often there is pressure from others to do that and the reasons all seem legitimate…at the time. But really the only thing most of us need is a car good enough to get from point A to point B. In my situation, that is about 15 miles one way. I don’t need a fancy car to do that. I do however need a reliable car. The difference is the cost.

Quick decision time….

At times it is good to make quick decisions. Like what to have for lunch, or simply deciding not to eat at a restaurant. Deciding how much to put in savings each paycheck. Quick decisions usually have little or no impact on our overall quality of life (yes, I am excluding catastrophic or major emergency situations). These decisions are simple and leave us feeling generally good.

Decisions made easy…

What makes it easy to make decisions? When you know what you need or want and the difference; the decision making process becomes really simple. Going back to the car scenario, if you know what you need and your budget, then you have naturally limited the choices. So, we could say that in order to help the decision making process simple then we should find an easy method to limit the choices. There are three things to consider in the decision making process: values, cost, and does it help me achieve my long range goals? Every decision should be guided by those three considerations. Cost is a twofold scenario of economic or monetary and social. Remember that there could be a social cost associated with a decision. For example are you willing to risk public ridicule for your decision?

Establish your value, which means what you, as a person, are willing to allow in your world. You have direct control over this. You don’t have to buy that car, take that job, or eat that food if you don’t want to. Second always establishes a budget, what you are willing to spend or what the pay at a new job must be. Third, make sure it moves you toward your long term goal. If your goal is to be a millionaire, then buying fast food at every meal probably won’t help you get there very fast.

When you have established these three things you will become very focused and intentional about how you make your decision. Give it a try. Write it down and see how it works for you.

Milestones

One of the most important elements of setting and achieving long-term goals and objectives is to celebrate milestones. A milestone is the achievement of an intermediate goal or objective. For instance, if the goal is to lose 30 pounds in a year a milestone might be losing 10 pounds. Now, we celebrate all kinds of milestones in our lives some are quick and easy, while others take years to achieve. Examples of quick and easy milestones are birthdays or anniversaries. We celebrate these out of tradition and without much thought.

Let’s explore what we could be celebrating as milestones if the goal much higher and make it a bit more complex. Something like saving for retirement or getting out of debt or starting a new business. All of which I am trying to do. I must admit that it is better to focus on one thing at a time. Like getting out of debt and letting retirement go to the debt is cleaned up. However, I have chosen to do all three at simultaneously, which is not bad just not the best. The reason is that what is going into retirement could be going to the debt which has a guaranteed ROI (example: 4% on the car loan, 5.25% on the motorcycle loan).

Back to the milestones. In most instances there are intermediate achievements within the larger goals that should be celebrated. These little celebrations will provide some added motivation and something to look ahead to in the drive to achieve a larger goal. An example might be, if the larger goal is to become debt free a milestone would be to reduce the debt by 20%. Or maybe the larger goal is to become a millionaire, a milestone might be when you have $100,000.

The idea here is to keep the momentum and energy up. If you have never celebrated a small victory, then you might lose sight of what is important. Celebrating the achievements and progress is very important.