It's All About the Numbers

I have a problem with my weight. This is a result of decisions I have made and the way I have lived my life. I have spent way too many hours parked in front of a computer screen and too little time engaged in cardiovascular activities. I am doing better. I walk almost every day. Individual decisions made daily are changing the way I live my life. I have lost somewhere between 35 and 40 pounds, but I have plateaued. I am nowhere near my goal. I am not doing so well on the left hand side of the weight equation.

Food In = Fat Stored + Calories Spent (Exercise)

My diet still contains too many carbohydrates, too much animal fat, not to mention the beer that I drink before I go to sleep. I haven’t made very many changes in this part of the equation. If I want to reach my goal, I am going to need to make better Food In decisions over an extended period of time.

The scale doesn’t care about how hard I try, my genetic predispositions, or any personal problems I might encounter along the way. I get on the scale. It tells me how much I weigh. If I want that number to drop, I have to do one of two things. Eat less or exercise more.

Financial problems are no different. Whether they are your personal problems or the problems of a multinational corporation earning billions in profits every year, the money equation doesn’t care about your personal interests, good intentions, bad luck, lack of opportunity, or any unfairness you may encounter in your life. It just reports the cumulative results of your decisions over time.

Money In = Money Stored + Money Spent

People who have not worked in laboratories, believe that Science give precise repeatable results. That isn’t quite true. How an experiment is constructed as well as the limits of the instrumentation affect the accuracy of the results. When dealing with complex systems in the real world, it is difficult to account for every conceivable variable. The results of a particular experiment can fluctuate. However, as you run and refine the experiment over time, a pretty clear picture of reality will begin to appear. In a paper the result of a certain experiment might be reported as, 100 pounds drag force, plus or minus 5 pounds with 95% confidence. In other words, you can expect drag forces between 95 pounds and 105 pounds 95% of the time.

Your life is a unique experiment. The decisions you make; the exact conditions of your environment; the improbable events we term good luck or bad luck all have their effects on your results. However, just as a knowledgeable personal trainer looking at my diet, age, and exercise program can make some reasonable guesses as to the outcome of my battle with the bulge, it is possible to make some general predictions about a group of people who live their lives making similar decisions.

Consider: A fifty five year old midlevel (average) engineer can expect to earn somewhere around $125,000 a year; maybe a little more in private industry; maybe a little less in the Government. Stanley and Danko would predict this particular average engineer would have a total net worth of $687,000. Those are just average numbers. There is a range of results. I expect someone somewhere could provide us with an in depth statistical analysis of engineering salaries.

Consider: A fifty year old general manager of a McDonald’s restaurant. Glassdoor reports that she would be earning somewhere between $30,630 and $63,000 per year. Average earnings for a McDonald’s manager are $45,945. Let’s assume, given her age she is somewhere near the top of the range, $60,000. Danko and Stanley would predict her net worth as being close to $300,000.

If your life is not producing the results that you desire, it is up to you change your decision making process. Make better decisions. Then over time, I can state with a high degree of confidence that you will change your life.

Find a field of interest where there will be a demand for your services. You don’t need to be a nuclear qualified welder or a engineer with a MS and a PE license to find a job. I know several plumbers. Two of them lived in houses that cost considerably more than the house this mechanical engineer inhabited during those years. If you consistently work uncompensated overtime in a salaried position, it is likely that your supervisor will notice. There is no guarantee, but if he is just (from personal experience I can tell you not all of them are) you will be rewarded for your faithfulness. For most entry level positions, just showing up on time on a regular basis will put you somewhere near the front of the pack. Add a good attitude, a solid work ethic, and personal honesty to the equation. It is unlikely that you will remain at an entry level for very long.

Once you have a goal, seek expert advice, a role model, or better yet a mentor to take those first steps. I started learning about investments from more experienced coworkers, and a conservative value investment newsletter. I have never stopped trying to find writers and experts who know more than I know. Somewhere, somebody is doing what you want to do and succeeding. Seek them out. Read their book. Ask them questions.

It is not my job to tell you how to live your life or how to attack the money equation. You can choose to work harder or smarter. You can choose to learn about how to manage Money Stored. There are men and women who have no job other than managing their money. You can even learn how to live a better life on less money.

It is the purpose of this blog to help you explore pathways to financial freedom, whatever that might mean to you. Spend some time seeking peace through prayer or meditation. Then analyze your problem in a calm dispassionate manner, understanding that you are not your problem. Decide on a goal that is meaningful and believable--to you. Then without excuse, explanation, or retelling your personal story propose something that you can do to move closer to that goal.

Then take action.

James 1:5
If any of you lacks wisdom, you should ask God, who gives generously to all without finding fault, and it will be given to you.