Wednesday, June 24, 2015

Cash on Hand

The latest numbers are out from Bankrate’s annual emergency savings survey. 29% of Americans have no emergency savings. They are literally living paycheck to paycheck. An additional 21% have some savings, but not enough to cover 3 months of normal living expenses. That means that about ½ of American households are financial disasters waiting to happen.

Only 22% of American household have enough savings to cover six months of living expenses.

The obvious question: (Quoted from the original Bankrate article.)

“Not surprisingly, income level is a great predictor of emergency savings. Fifty-three percent of those making less than $30,000 a year had no emergency savings. That's nearly twice as much as the $30,000-$49,999 group; more than three times as much as the $50,000-$74,999 group; and more than four times as much as the $75,000-plus group.”

Interestingly only 46% of households with an income of $75,000 a year OR HIGHER have the full six month emergency fund normally recommended by most financial advisors.

People between the ages of 30 and 49 are the age group most likely to have no emergency fund. Evidently, people under 30 years of age have been sufficiently frightened by the last 7 years to understand the value of an emergency fund. People over 50 are expected to have money in the bank. After all they have been employed for several decades. The middle group are the folks trying to maintain a middle class lifestyle that includes a house, family vehicles, child care, and keeping up with the Jones. That isn’t so easy to do in this day and time. They are living at the edge.

Authors have various opinions on the emergency fund. Dave Ramsey, for example, believes that anything under $1,000 cash on hand is an emergency. I agree. Twice during the early years of our marriage our liquid net worth dropped below the $1,000 threshold. In both cases I considered it an emergency that merited immediate attention. Those were mid 1970s dollars worth about $4.42 in 2015 dollars. I would think that anyone with less than $3,000 in readily available cash is asking for trouble. A rebuilt 2002 Honda transmission runs in the $500-$700 range. That does not include the labor it takes to pull the old one out and install the replacement.

An article from Business Insider by Libby Kane provides some common sense analysis of some conflicting thresholds.

She considers three months expense money on hand the dead minimum for healthy adults with no dependents. Three months is also the bottom of the 3 to 6 month acceptable range for Dave Ramsey’s “baby step 3.” The job market is finally improving. Household incomes are starting to creep upwards. Even though it isn’t 2009, could you be certain that if you lose your job you could find another job in less than three months?

Six months cash reserves in a federally insured savings or money market fund is the almost universally accepted number for a fully funded emergency account. This number goes back at least to the late 1970s when I first heard it on Bruce William’s talk radio show. Libby Kane believes a minimum of six months is particularly important for dual income households, families with dependents, or those living on commissions.

About five years ago Suze Orman decided to shake things up a bit by changing her recommendation from six months to eight months in emergency savings. Although this number is not widely accepted, the unemployed and underemployed who suffered through the Great Recession most likely would agree with the higher number. Libby Kane believes eight months would be appropriate for older folks or families with health problems. She also added retirees to this list. Depending on your retirement income situation, if you have less than many years’ worth of cash or near cash assets you better put off retirement for a few more years, but that is the subject for another time.

I haven’t changed my mind on this one for somewhere over 35 years. Number 7 on my list of basic financial rules is, “Start a “rainy day” fund in a bank or a money market fund. The goal here is six months cash reserve (six months take home, both salaries). It will take some time to reach this goal. Don’t beat yourselves up about this but keep putting a little something aside every month.”

I can’t remember when we actually built up a six month reserve, but I would guess it took us about 15 years.

Always pay yourself first. This is another one of those almost universally accepted financial rules. Before you start to plan your expenses, peel off 10% of your take home pay--right off the top--and put it in savings. If you make savings your first priority consistently over time the money will be there when you need it. If you can automate this process so that you never touch the money by using auto-debit to a separate account at your bank or credit union, so much the better. Finally, as you construct your monthly budget be sure to put something in the envelope marked contingencies. Dave Ramsey calls this the “blow” envelope because it is a certainty that some months will blow your budget right out of the water.

This is important. An emergency fund can keep you from using a high interest credit card to pay for something like a replacement washing machine or new tires for your car. Even $1,000 can save a family from payday lenders and other parasites. If you don’t have an emergency fund, start one today. Throw money in a jar. Hold a yard sale. Take a second, part time job for a few months. Pay yourself first. You won’t regret it.

Saturday, June 20, 2015

Two Problem Children

In dealing with individuals who are threatened by their financial problems I find I almost always meet with resistance on two points, convincing them that a problem with debt can’t be solved with more debt and the threat of living on a budget.

With the exception of medical expenses, debt is a free will decision. You didn’t have to sign up for that credit card. No one held a gun to your head and made you carry a balance on the thing. You didn’t have to run up the average $29,000 student loan bill. Working a $15 per hour a job while living at home could generate that kind of money without any interest, dividends, or capital gains. Note: This is another bad example of an average. Many students graduate with a zero balance. You certainly didn’t need to take out the $27,000 average car loan. A $3,000 car can get you back and forth to work for a few years until you can afford to buy something better. Even a mortgage is a decision that needs to be balanced against the cost of equivalent rent and a clearheaded evaluation of the risk of foreclosure.

God lists debt as a part of the curse. He also states the ability to lend money is a blessing. Do you want to be a part of the blessing or part of the curse?

When asked, Warren Buffet as well as a number of his billionaire buddies state the best financial decision that a young person can make is the decision to avoid debt like the plague. If you find yourself in debt, don’t beat yourself up about it; instead make a plan on how to get out of debt.

That brings us to the budget. If your net worth is dropping on a regular unplanned basis, you have a problem. You need to be living on some kind of budget. If you don’t manage your money, it is a certainty that over time your lack of money will come to manage you. The full press monthly zero sum budget is the gold standard. Why monthly? Because it is likely that most of your bills, including rent, car payments, credit card statements, and utility bills arrive in your mailbox once a month. The prospect of planning for and living on a to the penny monthly budget isn’t a pleasant prospect, but neither is bankruptcy court or a visit from the repo-man in the middle of the night.

If you are seriously ill you are in need of serious medicine.

Is there a simpler way? This blog is not a one size fits all, my way or the highway financial class. It is an opportunity to explore different pathways to financial freedom. If you can make it work there are options short of the zero sum budget. You can start by tracking your expenses (every one of them to the penny) for a month. Not only will this simple exercise lead you in the direction of mindfully choosing how you use your money rather than throwing it this way or that on impulse, it will also begin the budgeting practice in your mind as you decide whether or not you really want to explain a $5.00 latte to yourself when you can’t make the minimum payment on your credit card balance.

I have proposed the lazy man’s quick and dirty budget test. Just list your monthly take home pay on one side of the page. Then on the other side of the page list all your expenses in broad simple categories to the best of your ability without spending a lot of time on the process.

Here is a quick and dirty scale to go with this quick and dirty budget.

Green Light: If you are living on 70% or less of your take home pay
Amber Light: If you are living on 90% or less of your take home pay
Red Light: If you are spending more than 90% of your take home pay

If this simple exercise produces an amber or a red light, you need to consider stronger medicine.

Richard Jenkins proposes the 60% solution as a sound method of budgeting that is actually easy to practice. The goal is to live on 60% of your gross income. This money covers the basics food, clothing, essential household expenses, insurance, charity, all bills (including nonessentials like music lessons for the kids or cable TV), and taxes.

The remaining 40% is divided up in priority order as follows:

1) 10% Retirement. In the author’s case, this all went into his 401K.

2) 10% Long term savings. This amount should be automatically deducted from your pay. You should never see it. It should be relatively illiquid. If it takes a little work and a couple of days to get at this money you are less likely to use it.

3) 10% Short term savings for irregular but somewhat predictable expenses such as Christmas, vacations, car repair, and new appliances. This money should be held is something like a money market fund that makes it easy to spend when it is needed.

4) 10% Fun money. This money can be wasted on whatever suits your fancy. Maybe you might want to think about a pink checkbook for the wife and a blue checkbook for the husband for this one.

The author admits that this method will not work in every case because sometimes more than 60% of your gross income is already spent at the beginning of the month.

Unless you are rich enough that your accountants perform this service for you on a quarterly basis, calculate your liquid net worth on the first day of every month. There is nothing that can tell you so much about the direction and magnitude of your financial vector with so little effort.

Just add up all your liquid assets, bank accounts, brokerage accounts, retirement accounts and such. Don’t include the value of any physical possessions, such as cars, furniture, appliances, or your house in this calculation. Even though your stuff is worth something, everything but the house is a depreciating asset that you are currently using. If you sell something then you can add that money to your liquid assets.

Then subtract the balance on all your loans and credit card balances except for the mortgage. The resulting number is your liquid net worth. If it is getting more positive on a regular basis, you are probably doing OK. If this number is headed in a negative direction, especially if you don’t know why, chances are you need to live on a formal monthly zero sum budget. Once you know where all your account user names and passwords are located this process should not take longer than 30 minutes a month.

Treat the question your mortgage (remaining interest and principal) and the equity in your home as a separate calculation.

Then there is always the envelope system (physical envelopes containing cash or digital envelopes containing digital money). This system has proven itself for about 100 years. An actual factual envelope containing cash is particularly good for problem areas like restaurants or cigarettes.

No money in the envelope? No smokes.

Your excuses don’t matter. They are not going to make your world a better place.

If you believe you have to have credit card balances, you won’t solve your problems.

If you believe you have to have a new car even if you can’t pay cash, you won’t solve your problems.

If you believe you have to borrow $100,000 in order to have a life, say goodbye to the first ten years of your adult life, even if you are lucky enough to find a good job.

Don’t tell yourself you don’t earn enough to budget. If you can’t learn how to budget $20,000 a year, you won’t do any better on $40,000 a year. There are people living paycheck to paycheck who earn $100,000 a year or more.

Don’t tell yourself you can’t budget because you live on an irregular income. The budget forms for irregular income exist. Learn how to use them.

“They” want debt slaves and tax donkeys. They want victims.

Instead of taking the easy path that leads to destruction, wake up and become free.

Friday, June 19, 2015

What Can a Chimpanzee Learn From a Baboon

We live in an age of transition. It is a time when the stories we have told our children are no longer true. I believe that there is nothing to compare to what is happening in our country today since the transition from an agricultural feudal society to an industrial proto-capitalist society in Europe, especially in England, during the early years of the Nineteenth Century.

For about 150 years commencing sometime around 1830 the United States enjoyed an upward trajectory of increased national wealth and a higher standard of living based on an ever increasing supply of capital multiplied by the power of technology that was serviced by a constant supply of cheap immigrant laborers. The wealth created by this engine, particularly in 25 years following World War II, allowed the average worker with no particular skills to enjoy a standard of living unparalleled in human history. A man willing to work for 40 to 50 hours a week at some unpleasant mindless task could reasonably expect to support a wife and two children, while paying for a house, and a car.

Starting around 1965, German and Japanese industry recovered from the devastation of the war. Then the rest of the world followed their lead. Starting sometime in the waning years of the 1970s we have lost in the neighborhood of 20 million industrial jobs to countries like China. Low wages and global over capacity in key industries like primary steel have guaranteed that mills like the great Bethlehem steel works at Sparrows Point will never again produce thousands of high paying, wealth generating union jobs. It is growing harder and harder for a man of average or even above average ability to support his family by exchanging his time and sweat for a living wage. Mindless unpleasant work can be better accomplished by machines that require neither a weekly paycheck nor health insurance. Traditional back office jobs performed by above average college graduates, such as accountants, have disappeared into sophisticated computer programs located in the cloud that are tended by data entry clerks that barely require a high school diploma.

Time is not a reversible process. The cat is out of the bag. As a nation and as individuals we can not close our eyes, cover our ears, and pretend it will all disappear like a bad dream. We are going to have to find a way to embrace change, finding new techniques to adapt to this evolving environment in which robots create the robots that create the computers that manipulate the knowledge that defines power in this brave new world.

I can’t claim to be a zoologist, but I have read that when humans move into chimpanzee habitats, the chimps just die out. However, when humans move into territory inhabited by troops of baboons, the baboons thrive in their new environment. If their usual food supply is disrupted, they discover what humans are growing in their gardens and steal it. If there aren’t any gardens these ingenious creatures learn about garbage dumps. Some of the bolder baboons have even taken to breaking into houses in search of what might be found in a human’s pantry.

I have read that troops of baboons are sort of semi-organized affairs. There are a number of dominate males of differing ranks who have followings and harems. At the start of the day these males will jump around and make a lot of noise in attempt to attract followers and further establish their position in the pack hierarchy. Evidently this is some kind of planning meeting in which the leader confidently tells prospective followers that he will lead them to the best places in the best garbage dump in town. Then these ad hoc teams head out on the daily commute to look for opportunities.

Again, I don’t claim to be a zoologist but these creatures must be doing something right if the can they can continue to exist in the presentence of hostile humans. Baboons are evidently more innovative, flexible, and resilient than their bigger brained more peaceful cousins, the chimpanzees. They seem to be doing a pretty good job adapting and evolving in a hostile ever changing environment. Only last year the worst threat to the troop was a few hungry lions. Now all these humans have moved into our neighborhoods. What next?

Starting in the late 1980s, I started noticing articles reporting on eighteen year old high school dropouts earning $200,000 a year programming in SUG II or some similarly obscure language. Whatever the hot new coding method of this year might be, there was certain to be an oversupply of programmers the next year. Then something else would be hot. Credentials didn’t matter. Degrees didn’t matter. Companies were looking for someone who could do the job and they were willing to pay outrageous amounts of money to get the work done.

Entrepreneurs are out there discovering new possibilities that couldn’t have existed even ten years ago. They are building their teams and making their plans. If their timing is good and they have a reasonable supply of capital they will become the Alpha Male (or Female) in their troops.

I have seen men and women who have been punched hard in the face by this sometimes seemingly sadistic economy, get up off the ground and courageously move from plan A to plan B or whatever it takes, sometimes two part time jobs or even two full time jobs. They simply don’t give up. Even without any special skills, they remain resilient, moving flexibly from opportunity to opportunity, no matter how marginal.

They will survive.

No matter what happens in our nation over the next twenty years, the baboons among us will survive. The chimps are likely to disappear. I don’t like this state of affairs. I am afraid that I am closer to a chimp than a baboon in temperament. I believe that people with advanced degrees in technology and high level security clearances are going to be OK. I believe that some professions, like physicians, will continue to demand credentials guaranteeing an artificially limited number of practitioners a high standard of living.

However, I am very worried about the average worker with a high school diploma and no special skills in this brave new world.

Wednesday, June 17, 2015

Can Writing It Down Change Your Life?

We have all heard that journaling is a good idea. It is something that is recommended by psychologists and religious teachers alike as a method of self examination, but does it really do any good? I would give my personal experiments with journaling a mixed review at best, in part because I am not certain I want to keep a permanent written record of some of my less than stellar thoughts.

Introductory texts teaching technical analysis, trading stocks on the basis of market activity rather than investing in a company on its intrinsic value, agree that after completing a transaction, the trader should write down what he did, why he did it, and how it worked in a formal logbook or spread sheet. Now there is some evidence that this kind of journaling can also improve job performance generally. A Harvard Business School working paper by Professor Francesca Gino demonstrates that employees who set aside 15 minutes at the end of the day to reflect on and record their daily activities will measurably boost their job performance. In an experiment involving employees at an Indian multinational IT services company, Wipro, one group of employees were given 15 minutes at the end of the day to record their activities. After 10 days the journaling employees had 22.8% higher performance than the control group.

"In the field study, we were asking people to work less," Gino says. "It's counterintuitive, because you think you want to use those 15 minutes to keep working, but it actually leads to performance."

I would like to know what was being measured and whether or not supervisors were allowed to read these journals. Unfortunately, this information came from a news article entitled, “This 15-Minute Activity Will Make You More Successful at Work” by Drake Baer. It appears that access to the paper requires a subscription to the Harvard Business Review.

Professor Gino developed the idea for this experiment from her personal practice as a business school instructor. After each class she records what happened including student comments and the points in her lecture that led to quality discussions. She then uses lessons learned from her journal in planning her future classes. In her studies, Gino has discovered this method can help increase a student’s grade point average and while seeking re-employment after losing a job.

She observes, "It's very easy to deceive yourself if you're just thinking about it, but when you write things down on paper, it's easier to identify what's helpful."

Monday, June 15, 2015

Not Yet Half Full....

I saw this chart this morning in an article detailing our current unsustainable bubble economy, fueled by funny money printed by the Federal Reserve in an attempt to postpone what some term a Kondratieff winter. One way or another debt, particularly bad debt, must be squeezed out of the economy. How and when that happens remains to be seen. However, as I studied this graph, it occurred to me that while the glass is not yet half full, the water level is heading the right direction.

Credit card debt is getting better. After peaking in 2009, as a nation we are starting to pay down our credit cards. The numbers are still not good. Interestingly, credit card debt is a tale of two cities. The average U.S. household owes $7,327. However if only the households that carry a balance on their cards is considered, that number rises to $15,706. A fine example of why the average is sometimes a relatively useless number when considering financial statistics. $15,706 in credit card debt, most likely in the 12%-20% range is a crippling burden for a typical family. It is hard for me to understand how a family could allow this to happen, but I have heard too many stories of how the unemployed tried to maintain their standard of living by putting it all on plastic until they landed in bankruptcy court.

We are doing better with mortgages. My highly calibrated eyeball sees about a $1.5 Trillion drop in mortgage debt since the real estate bubble popped in 2006. As a nation we still owe over $9 Trillion on our homes. As a point of reference we owed just over $6 Trillion in 2003. Unfortunately, it is difficult to find hard numbers on the various sorts of zombie mortgages waiting out there in the darkness. Sometimes the borrower, knowing that foreclosure is in the cards, vacates their home with or without notifying the bank. The bank knows that it isn’t getting the mortgage check but doesn’t know why. In some cases the bank chooses not to maintain the property or pay the property taxes. This throws both the property and the mortgage holder into a state of limbo until formal bankruptcy proceedings are complete. More often the homeowner just stops making payments, but remains in the home until the sheriff knocks on the door. If the occupant is maintaining the property, it can be in the bank’s interest not to go for a quick kill in foreclosure proceedings. If the local market is extremely depressed, the bank may lose less money by letting the current occupant remain until housing prices recover a bit.

The really bad news is student debt. In 2009, the year I started writing this blog, student debt was only around $150 Billion. It was not yet an issue. In only six years that number has jumped to around $1.2 Trillion! What was once a minor irritant has exploded into a full blown national crisis. How in the world something that bad could happen so quickly, is a story of greed, naïveté, and the well intentioned folly of a Government that believes more money always makes everything better. It is particularly destructive to our economy because it postpones and limits the development of household formation units. Traditionally young families are one of the major drivers in the economy. Young people get married. Then they start a family. Then they have to buy houses, furniture, appliances, minivans, new clothes for their children (every year), school supplies, etc. etc. Well, they aren’t going to do much of that until they pay off those student loans. It also causes a lot of psychological problems. Young people believed a lie, that a college diploma is a golden ticket to the good life. In fact about 40% of the recent college graduates lucky enough to find a job will not be working at a job that requires a college diploma. Of course us Baby Boomers all know coworkers and friends who tell unhappy stories about their boomerang children sulking in their basements. It is a disaster.

People like me who write blogs like this one still have to convince our nation that debt is a curse not a blessing. However, as Bismarck observed, the foolish are learning from their mistakes and the wise are learning from the mistakes of others. Gradually, as a nation, it is beginning to dawn on our collective psyche that debt is a bad thing that constricts and limits our freedom. Hopefully, sometime in the future, we will rediscover that the ability to lend money to others is a blessing.

Sunday, June 14, 2015

Preach What You Practice

I recently read something that caught my eye, “Preach what you practice.” I can’t find who originally coined the phrase, but I like it. We have heard the statement, “Practice what you preach,” usually in a self righteous rant attacking an opponent’s lack of perceived personal integrity. As I have grown older I have found hypocrisy is a more complex and nuanced problem than I believed it to be in my youth. Sometimes an action that appears hypocritical in another is motivated by values that are held by that person which are not apparent to you. In addition a person may sincerely believe in a particular virtue but find difficulty in applying those truths to his life. Unless he claims to be something that he is not, he is not a hypocrite even though his actions do not correspond to his standard of personal integrity. Rather than diligently seeking to remove a speck of sawdust from our neighbor’s eye or even contemplating our own failure to perceive and condemn our own shortcomings, let’s think about what we are doing in our life that works.

Then, let’s preach what we practice.

How we interact with the world is based on our understanding of the world. I will term this understanding your personal meta-narrative, a grand overarching series of beliefs and stories that create your world and are fundamentally responsible for your interactions with this world. Some of the stories we tell ourselves are useful others are not useful. Even if your meta-narrative contains elements of the truth about reality, if it is not helping you to create a better world for yourself and those whom you love, it is not useful. As for the truth, it seems a little messianic for any of us to claim we have the truth, at least in, “The truth, the whole truth, and nothing but the truth, so help me God.” meaning of the word.

I have a friend who is a world class master craftsman. His work appears in famous hotels, like the Ritz Carlton as well as luxury condominium developments in a city where over the top perfection is barely acceptable. Along the way, he has trained numerous young men in his art, readily giving them secrets of his trade that took him over twenty years to acquire, even though he knows these young men will become his future competition. Why would he do that? Because he knows the importance of preaching what you practice. If it is really of value, it is an important step in making the world a better place.

I have spent a considerable amount of time and effort trying to identify behaviors that are consistent with my beliefs as a Christian that are useful in the quest for financial freedom. Along the way I have learned that there are certain behaviors that are more likely to lead us towards financial freedom and others that just as surely lead us to poverty and bondage.

These behaviors invariably rise from the stories we tell ourselves.

I am constantly told that everybody has to be in debt. No. That is a story you tell yourself. You choose to be in debt, because on some level you believed that somebody else’s money could buy you happiness or fulfillment.

Most frequently this argument will be applied to the purchase of a house. Everybody has to have a mortgage, right? Well, no. I took out a mortgage on a three bedroom home because it was cheaper than renting a small two bedroom apartment in the Washington, DC area at a particular point in time. That worked out quite well for me. However, taking out a mortgage on similar homes in my neighborhood at another point in time proved a catastrophe for those unfortunate souls who bought into the 2005 housing bubble.

I have been told by Millennials that student debt is a necessity. No. It is not a necessity. It is a very dangerous free will decision that is likely to strangle your ability to take the next expected steps along the road of life for maybe, ten years. You just graduated with a mortgage, but without a house. That burden postpones marriage, children, and buying that first starter home. In spite of what your parents or well meaning adults (I have been guilty of this one) might tell you, a college degree may or may not be the best plan for your life. Perhaps you were born to paint fireballs and skulls on motorcycles or repair automatic transmissions for Mercedes Benz, an occupation that pays an annual salary in the low six figures. If you truly desire a college education there are many options to taking on $30,000 or more in debt. The best option for the average student not interested in spending time in the military is taking the funds from a Federal Pell Grant to a nearby junior college. If you kill it in a two year school, there is a good chance you will get scholarship or grant money from a state college. You can get a degree from a good school without debt even if you are not the valedictorian of your high school class. It may not be easy but it can be done.

How about the six year car note on the $50,000 pickup in your driveway? Nah, don’t get me started.

How about investing in Wall Street? Do I think for a minute that the stock market is an even playing field? No, but if my story ends there I will not have an opportunity to participate in just about the only place that an average American can build considerable sums of cash for dreams like retirement or a child’s education. Yes, Wall Street if filled with crooks and con-artists. However, consistently investing small sums of money in a diversified mix of low cost index funds over long periods of time will likely bring you to a point of financial freedom, perhaps a greater freedom to do good in this unhappy world than you imagined could ever be possible. Even building my own personal mutual fund out of a mix of boring, conservative, dividend paying stocks has produced pretty good results, though I doubt my personal insights beat the indices over the decades, I have followed both paths. I am here to tell you they work.

If the stories that you tell yourself are working, great! Share your wisdom with the rest of us, “Preach what you practice.” If your stories are surrounding you with a cold dark mess, understand that as you change the stories you tell yourself, you will change your interactions with the world that surrounds you.

And that, can change everything!

Monday, June 8, 2015

What Do You Bring to The Table?

A generous person will prosper, whoever refreshes others will be refreshed. Proverbs 11:25

Michael Ellsberg is an author who studies men and women who became millionaires and billionaires by dropping out of the system, people who did not follow both normal career and educational paths, but found unusual ways to achieve success. Of course the ability to network and sales skills were important tools that helped them on the path to financial freedom. In Ellsberg’s mind networking and sales skills are different but inseparable threads in the paradox of success:

In order to advance your own agenda, you must forget about yourself and your agenda. Instead, you must focus on the agenda of your employer or your customers who are ultimately, your employer.

As you build a network, you are marketing a product. That would be you. No, I am not suggesting that you approach every potential relationship in life like a sleazy used car salesman looking to make a kill. Instead focus on listening and learning. How can you be of service to this individual? What do you know or have that they might need? It is easy to believe that when you approach a person who is successful, wealthy, and powerful, like your boss that she holds all the cards. That isn’t true. Just like you, she has needs. Perhaps you know something or someone who can satisfy those needs. Perhaps all they need is an opportunity to talk. Can you hear what their words really mean? Every person has his own values and goals. These are not the same as your values and goal but they are every bit as valid and valuable to him/her as yours are to you.

Life is complex. Health, a meaningful job, financial freedom, a happy family life, a supportive social network, and spirituality are all necessary components in a happy successful life. Nobody is killing it in all these areas. You might know something about healthy living that could benefit another. You might be in a position to introduce someone to another person who could hook them up with a better job. Whatever you have that might benefit another, look for opportunities to be a blessing. In Maryland I knew two good automobile mechanics. In my new home, neither of my cars has yet required any serious work. Where do I take them if something major goes wrong? I hope a friend can clue me in when the time comes.

Proverbs 18:16
“A man’s gift makes room for him, and brings him before great men.”

The obvious application in the Biblical world would be offering a gift to a king or the minister of a king to obtain access to the throne room, but it could just as easily apply to the talents of a skilled craftsman or a competent physician. I would offer even another understanding of this proverb. The gifts of someone with a generous spirit, someone who is open to opportunities to be a blessing to others, great or small, will in turn be blessed. Their gifts will open doors and make room for them, maybe even in the presence of the mighty.

I have listened to the stories of many highly successful men. All of them that I would want to emulate in some way or another are givers. One of them, an elderly man who owns an insurance agency, gives away his entire after tax salary (approximately $1 Million a year) from his business to charity. Don’t worry. His many investments more than take care of his family’s needs.

Be a blessing, knowing that while God is not a cosmic gumball machine that exists for our benefit, he will be faithful to reward those who diligently seek after him and walk in his ways.

Get a Haircut and Get a Real Job

Get a haircut and get a real job
Clean your act up and don't be a slob
Get it together like your big brother bob
Why don't you get a haircut and get a real job
George Thorogood

The first time I heard this song back in the early nineties, I almost couldn’t stop laughing. Boy, did it hit the nail on my head. The song and the expression, “real job” both became a part of my life. You see, I made the great compromise. A liberal arts degree landed me in a series of factory jobs that I didn’t like and didn’t offer very good pay. While it is sometimes necessary to work at whatever is available in order to take care of yourself and your household, no sane person wants to work at a job they don’t enjoy for lousy money. Working for low pay in your God given calling, I understand. Working at a job you can’t stand that pays an obscene amount of money for a few years that I understand. Not even all medical doctors love their jobs.

But, if you hate your job and it doesn’t pay spit, plan your escape!

I decided that working in a research laboratory as a mechanical engineer rather than as a floor supervisor in a factory might result in a more acceptable job that paid a salary that would support a lifestyle that my wife and I would find acceptable. I went back to school and earned my BSME.

I made the great compromise with life. I got a haircut and I got a real job.

Writing was my passion, but nobody seemed interested in paying me to write. I was raised to function as a cog in a great corporate or governmental bureaucratic machine. I knew how to go to school, get my ticket punched, do the job search thing; then find and keep a job in an existing organization. I did what I knew how to do to obtain a reasonably satisfying, meaningful career that paid enough to cover our needs and some wants.

Now, sometimes I use the expression “real job” in conversations. I try to use it intentionally in order to get people to stop and think about one of two life questions depending on context.

The first application usually appears in conversations with artists or others who are pursuing their dreams, but are having problems with the business of art. To these people I sometimes point out that it is a lot easier to live your dream if someone in the family has a “real job.” Understand this has nothing to do with how hard you work or the nature of your passion.

I know a man who has a wife who owned and operated a bed and breakfast. He willingly admitted that she worked more hours than he did in his steady nine to five job. He also believed that she worked much harder than he worked, but her business would not have survived if she didn’t have access to a family checkbook filled with money that came from his biweekly paycheck. For whatever reason, cash flow problems would have landed her in bankruptcy court if someone did not have a real job. Because someone had a real job, she was able to sell her business for a large sum of money that helped provide them with a very comfortable retirement.

I know a man who was once an engineer. He quit his job to become an artist. He has truly mastered his craft. I find the quality of his work absolutely amazing, but I don’t believe he could have reached such a high level if he didn’t have a wife with a BSRN who had a real job in a hospital that paid the bills and provided the family with health insurance.

I also use this expression when I believe I am talking to someone, like me, who is standing in a pair of uncomfortable shoes. Life seldom seems to work out as expected. If you find the difference between your expectations and the reality of your job situation unacceptable, take account of your options and do something to try and improve your situation. Complaining and waiting for something to change is unlikely to bring you any closer to happiness.

If you find your work meaningful and fulfilling; if you and your spouse are earning enough to meet your family’s needs and at least a reasonable number of their wants; then you have a real job.

I really admire people who have the courage and determination to live their dreams. It takes talent and a lot of hard work to walk the path less traveled. George Thorogood made it happen:

I hit the big time with my rock 'n' roll band
The future's brighter now than I'd ever planned
I'm ten times richer than my big brother bob
And he, he's got a haircut he's got a real job

If you haven’t heard the song, check it out. If I keep writing, maybe some day someone will pay me to sing my songs, but until then you get to listen for free.

Get a Haircut and Get a Real Job

Wednesday, June 3, 2015

Is it Right? Is it Legal? Is it Profitable?

Over the last couple of months, I keep running into people with problems who don’t understand what I term the Paradox of Success. I have also discovered that consultants, businessmen, and authors are all teaching their audiences, in very different ways, that their understanding of this paradox is the basis for their success. Here it is:

In order to advance your own agenda, you must forget about yourself and your agenda. Instead, you must focus on the agenda of your employer or your customers who are ultimately, your employer.

This truth can also be applied to any aspect of human relationships. This is important because, in the end, even in this day of computers, too big to fail corporations, and unthinking unfeeling Government bureaucracies our interactions can ultimately be reduced to me and one other person.

Bryon Traxler is a specialist who has done over $10 Billion in business as a mortgage broker. He finds funding at places like JP Morgan and Goldman Sachs that he then uses to fund an equity position in major real estate developments. Before he agrees to a business deal, he always first considers his potential partner as a person. If he doesn’t like or trust that individual he will not sign an agreement no mater how lucrative the deal.

Then he asks himself three questions.

1) Is it right?
2) Is it legal?
3) Is it profitable?

When he asks the first question he is really applying the golden rule (So in everything, do to others what you would have them do to you, for this sums up the Law and the Prophets.) to every aspect of the deal but profitability. Traxler happens to be Jewish, but that doesn’t matter, the law of reciprocity appears in the texts of 21 different religions. Is there anything morally wrong with your intentions? For example, if you are a thief, either someone who steals time or material from your employer or someone who runs a CMO considering the sale of subprime Collateralized Debt Obligation bonds to a state retirement system your actions do not meet the first test.

If your plan passes the first test there is a good chance, but no guarantee that it will pass the second test. Your dreams for a 400 unit luxury condo development in an older part of town could be a very good thing for you, your customers, and the city, but if the zoning board says, “No.” the buildings will never exist.

The third question applies to everyone involved in the deal. A businessman must consider the legitimate demands of three groups, his employees, his investors or shareholders, and his customers. Before you ask for a job, a loan or partnership agreement, or a raise, put yourself in the shoes of the person on the other end of your request. What’s in it for him?

First of all ask yourself, “Should he like me? Should he trust me?” Would you hire yourself or would you look for a better class of employee? This even applies to anonymous stock purchases by retail investors. All the masters want to know something about the management team before they buy a position in that company. Would you knowingly invest your retirement dollars in a business run by crooks?

Then, if you want $15.00 an hour, ask yourself, “Am I worth $15.00 an hour?” I am sure that if you are worth $30.00 an hour your employer will fall on his hands and knees for the opportunity to give you $15.00 an hour. If you can be replaced by someone willing to work for $10.00 an hour or a machine that works 24/7 without asking for raises or health insurance, your employer has a moral obligation to his customers and his shareholders to say, “No!” or “Don’t let the screen door hit you on the way out.”

If you want a raise, tell your employer what you are already doing that is above and beyond the requirements of your pay grade. If you don’t know about his problems or what is keeping him awake at night, ask. Offer a plan to improve your performance to meet his needs. Make certain he understands you are looking for a raise, but you are willing to do more to get it.

If you consistently strive to become a person of integrity and excellence, I believe that the universe, your higher power, or my God is watching your struggles.

He exists and he rewards those who seek him.

As Mother Teresa observed, “In the final analysis, it is between you and God. It was never between you and them anyway.”

Tuesday, June 2, 2015


Back when I first became a Christian, spiritual gifts were all the rage. We would ask each other, “What’s your gift?” or as a conversation starter we would ask, “If you could pick out a spiritual gift, what would it be?” It was easy for me to answer that last question. It was then and it would be now the gift of healing. To make a sick person well; to end pain and suffering; what could be better than that? Miracles of healing do occur from time to time. Unfortunately God has not used me as an instrument in any of these processes.

Still, I pray for the sick.

As a nation we tend to believe that doctors are gods who can answer our prayers with a miracle. Some critics of our healthcare system refer to it as a sickcare system, with good reason. The entire healthcare industry, doctors, drug companies, insurance providers, and patients are all focused on finding the procedure or drug that will get rid of our symptoms rather than focusing on what it would take to keep us healthy.

Some days I feel as though people in very real financial distress expect that someone (usually the Government) can give them a miracle pill that will end all their pain without any effort on their part. Unfortunately, it doesn’t work that way. Wealth like health is the result of a complex intertwining of assumptions, thoughts, decisions, and behavior over long periods of time.

One of my friend’s mother smoked cigarettes into her mid-eighties without lung disease. She finally quit when roll-your-own cigarettes became too expensive. She must have come from the deep end of the gene pool. Most people who engaged in her behavior would have died before the eightieth birthday. If you consistently spend more than you make over an extended period time, building up large balances on your credit cards, I can pretty well guarantee that a trip to the financial emergency room is in your future.

Even if you come from the deep end of the gene pool, super-sizing your daily intake of fast food rather than a eating reasonably sized portions from the menu of a nutritionally balanced diet is likely to cause quality of life problems as you move across the twenty or so years we call middle age. Like exercise and good diet, what you invest in your 401(k) while you are still in your twenties will almost guarantee a better life when you reach your sixties.

Take an inventory of your current beliefs and behaviors. Are they producing the fruit you want to see in your life? Are they likely to move you closer to a better you or a better life or are you taking unnecessary risks that are likely to cause you problems if everything else doesn’t go exactly as planned.

Do you want healthy teeth and gums? Do you brush and floss daily?