The Curse of Being Skilled
Saturday, February 21st, 2009 | work | 1 Comment
I’ve been increasingly frustrated at work lately. It seems that I’ve gotten a reputation for being smart. I’m viewed as the “go-to guy” for a number of projects. Normally, this is a good problem to have but it results in a very unpleasant side effect: managers try to dump a lot of work on you.
How I Won $100 For Nothing
Wednesday, February 11th, 2009 | Uncategorized | No Comments
When I was in high school, there was a pamphlet distributed to my entire class detailing a scholarship offered by a local community center. The only requirement was to make a website promoting ethnic diversity. This contest was open to any high school student from the county, so this was advertised to literally thousands of students. Naturally, my best friend and I pounced on this opportunity. We quickly filled out the application form (which only required our names and addresses - you could submit a link to your final product later) and got to work. We spent a few hours dreaming up lofty ideas for our website - should it be serious? Or funny? How were we going to show diversity?
I Could Die Tomorrow
Friday, February 6th, 2009 | Uncategorized | No Comments
Whenever I read personal finance articles online and the topic is saving money for the future, there is always one grasshopper among the commenters who berates us for wanting to save, saying something along the lines of “I could die tomorrow! Why not live life to the fullest now?”. Usually we personal finance types dismiss the call of carpe diem with a dose of realism: you probably won’t die tomorrow and if you spend all of your money now you will likely be SOL when you turn 60 with no savings. But what’s the truth? How likely is it that you’ll die? I looked into this using the 2004 actuarial tables from www.ssa.gov and the results were surprising.
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Whatever Happened to Hustle?
Thursday, February 5th, 2009 | Uncategorized | 2 Comments
Given the current state of the economy, I assumed that companies would be eager to make a sale or gain a new customer. But last week my girlfriend and I tried ordering a pizza and we were turned down by 3 places before we finally found a place willing to deliver. What kind of a pizza place doesn’t want to make a sale?
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How to Shine on a “STAR” Job Interview
Friday, January 30th, 2009 | Uncategorized | No Comments
If you’ve been looking for a job, you’ve no doubt sent out pallets of resumes but only gotten back a few phone calls and maybe an interview or two. It’s a tough environment for job seekers right now and employers are capitalizing on that by hiring only the best and brightest candidates. One tool used to evaluate applicants either on the phone or in person is called the STAR interview method and today I’m going to teach you how to ace this type of interview.
What’s Wrong with Used Goods?
Thursday, November 13th, 2008 | Uncategorized | 3 Comments
If you saw a set of used dishes that were in good condition at a garage sale, would you buy them?
Regardless of how you answered, you probably thought, even for a second, about how many people had eaten from the dishes. How “dirty” were these dishes, since they were used? What if the people who owned them previously had AIDS? What if the dishes had been sitting in the basement for years, or been used as a dog food bowl? I’ll bet you’d think twice about buying them if you knew their history. Even if you could buy them for a discount, it’s not worth the risk of inheriting the cooties that comes from buying somebody else’s goods, even if you run them through the dishwasher 3 times.
Fast forward. You are at a restaurant with your significant other. You are enjoying a nice wine with a steak dinner. All of this is being served on used dishes. Dishes that have been in the mouths and hands of thousands of people, probably some with AIDS. Who knows where the dishes have been. Maybe they got dropped on the floor in the kitchen. Maybe a rat or a cockroach crawled in them. But for some reason, you don’t think twice about eating from them. In fact, you pay a premium to be in this restaurant, eating from used dishes. You can only hope they’ve been through the dishwasher.
Why do we have this disconnect in two separate situations, even though the underlying facts are the same? Whatever the reason, it affects our ability to use money rationally. In the first situation, we stand to benefit from buying a set of dishes at a discount if we can get over the fact that they’re used. In the second situation, the used dishes don’t detract us from spending money. The underlying value of the dishes hasn’t changed - only our perception of the situation. Buying something from a neighbor’s garage sale makes us feel poor. Having dinner at a restaurant makes us feel wealthy. But if you look at what is happening to your money, it is reversed. Buying used dishes is cheaper than buying new dishes. Eating out at a restaurant is more expensive than staying at home. If you can master the skill of acting on the underlying value of these situations rather than how they make you feel, you are well on your way to saving more money.
3 Ways to Prepare for the Next Recession
Friday, October 24th, 2008 | Uncategorized | No Comments
You know how vomiting is when you’re sick: you can feel it coming, but you can’t guess the exact moment it will happen. Most often, you feel it too late and by the time you’ve ran halfway to the toilet your hall carpet is streaked with half digested chunks of meat loaf and ginger ale. In a few days, you’ll feel better but chances are you’ll get sick and vomit again sometime in your life. It may be years away until the next time it happens, but it’s going to happen.
Recessions are the same way. You will most likely live long enough to see a few of them, and when one happens you always wish you had prepared more ahead of time. So here’s 3 ways you can prepare:
Secure Your Job - Recessions have always involved rising unemployment and companies cutting back on spending. For most people, their job is their primary source of income - and losing it at a time when you have many people looking for work isn’t good. Luckily, there are many ways to reduce the chance that you’ll lose your job. First, make sure that your function at work is essential and that you are a top performer. It’s a hard decision for an employer to cut somebody who is useful. Second, make sure that you are on good terms with your boss or employer. As much as I’d like to think companies retain people based on performance alone, this isn’t the case in the real world. Charisma counts and since management is human, it’s harder to fire somebody you like. Third, send a short email or phone call to friends or colleagues you have in your industry. Even if it’s just to say “hello”, this puts you on people’s radar and will give you ground to start on in case the worst happens and you need to look for another job.
Build Your Cash - You will want to have a safety net of cash going into a recession. Although this is true in any economic condition, cash is even more handy in a recession. It provides a cushion of protection if you lose your job. It’s also great for buying things that come down in price during hard times, whether that be stocks, furniture or even garage sale items.
Enjoy It - Hard times bring people together. Cutting back on things like dining out can get you in the kitchen at home cooking with family or friends. If you don’t have money for expensive outings or vacations you can always stay in, bust out a board game that’s collecting dust in the closet and spend some time with the people you love. It won’t last for long though - the economy will boom again someday and people will get sucked back into the fast life. Enjoy it while it lasts.
Grandma Got It Wrong
Tuesday, October 7th, 2008 | Uncategorized | No Comments
Bad gifts and relatives go hand in hand. In fact, the more removed a relative is from you the worse the gifts get. Usually your mom and dad get you what you want for birthday and holidays. Grandma and grandpa get a little worse, giving you socks or sweaters. Even worse is that crazy uncle you only see once every 2 years - he gives you the broken typewriter he’s been storing in his basement for the last 10 years. And any time these people try to give you an “educational” gift, it’s usually something like a dictionary, a calculator, or - the topic of this post - a savings bond.
To an 8 year old kid, a savings bond is about as exciting as a pair of purple argyle socks. And from an asset allocation standpoint, they make just as much sense. Usually when you read about asset allocation, the theme is how younger investors can afford to take on more risk. You start out heavy on stocks and as you progress toward retirement you slowly shift your holdings into bonds. Of course, most of these articles assume that you are an adult. I’ve never read anything about how to apply this to children. But by this reasoning, an 8 year old has all the time in the world and therefore makes the best candidate to hold stocks.
So why do we give kids savings bonds? Is it because we’re too lazy to teach them what a stock is? Savings bonds are something that grandma should be buying for herself - not for a little kid. I suppose an exception would be made if you were saving for the kid’s college education. Maybe then a bond would fit into the mix. And for heaven’s sake we don’t even get them COOL bonds like corporate debt or even treasuries - no, it’s always the good ol’ Series EE.
I suppose buying bonds for children is better than nothing - but in my own unprofessional opinion, I’d get a child a few shares of a company they understand like Disney, McDonald’s or Apple.
Vo-Tech Kids and Babies
Friday, October 3rd, 2008 | Uncategorized | 1 Comment
If you’ve spent any time reading personal finance information, you’d know that a big piece of advice is to spend less than you earn. Some people take that to heart. Others get angry that we suggest something so self evident. But it’s true - if you want to build wealth you must have cash flowing into your life. If you want to do this well, you need to know what weighs the most on both sides of the earning/spending equation. (And it’s best if you learn these two things very early in your life)
The biggest boost to your earnings potential is education. The biggest drain on your spending is having kids.
EDUCATION
In high school, I was one of those elitist snobs at the top of the class. I liked to hit the books hard and think myself better than everyone else. I took a lot of AP classes and my classmates and I liked to look down upon the “dumber” kids that weren’t in the top 10%. We especially liked to make fun of the Vo-Tech kids. They didn’t have high GPA’s, so our high school had a program that let them take technical school classes (for things like Autobody, Plumbing, etc). We just thought we were so much better than them - after all, since we got all A’s we were just DESTINED to be successes, right?
All of my AP class went on to go to college. All of us graduated college, but our incomes aren’t the same. I did reasonably well (I majored in Engineering) and I enjoy a good paying job. But for the people who majored in History or Art (or God forbid, Art History), they are (on average) struggling. But do you know what we all have in common today? We all pay the Vo-Tech kids when we need our cars fixed.
Getting an education means gaining skills that are in demand and can be turned into money. And if it’s something that requires a college education (Engineering, chemistry, etc) so be it - go to college. But there’s a world of other skills that the world needs (bricklayers, carpenters, barbers) to function and there’s no shame in taking that path. The bottom line is that you need to be skilled in something.
It’s nice to study Van Gogh or Shakespeare and become cultured. But by all means you need to treat it as a hobby if you can’t find a way to monetize it. Don’t believe it? Check out these starting salaries for jobs with a bachelor’s degree versus blue collar jobs: (from bls.gov and salary.com)
Preschool Teacher - $22,680
Carpenter - $35,140
Government Social Scientist/Historian (bachelor’s only) - $28,862
Electrician - $41,940
Social Worker (bachelor’s only) - $43,500
Plumber - $39,200
KIDS
Don’t think that Chops doesn’t love kids! I do - but from a financial standpoint they are 18 year liabilities that you can’t get off your books. If you have children before you are financially ready for it, you are making it harder on yourself to build wealth. Having kids is the only financial mistake you make that can’t be undone somehow (unless you want to give them up for adoption). If you get in credit card debt, you can pay it off. If you buy a car that you can’t afford, you can always sell the car. But if you have kids, you need to know that you are legally responsible for them for 18 years. If your car breaks down, you don’t necessarily have to get it fixed. If your child gets sick, you are on the hook to provide for them.
Here’s a list of some expenses a child adds:
-Food/Diapers/Clothing/Furnishings/Toys
-Increased medical insurance premiums
-Increased life insurance premiums (assuming you do the responsible thing and get proper coverage for yourself/spouse)
-Daycare costs or loss of income if you decide to stay at home to raise them
-GBP (Glasses, Braces, Prescriptions - chances are your child will need at least one of them before 18)
-Allowance/Birthday/Holiday Gifts
-Schooling costs (Supplies, or tuition if you want a private school)
Obviously, there are ways of minimizing these costs, but you can’t get rid of them completely.
ADDING IT UP
How much does this really change your wealth building abilities? Consider the following: it is estimated that college grads earn $900,000 more in a lifetime than high school grads. It is also estimated that it costs about $170,000 to raise a child to age 18. Assuming you only have a high school education and one kid, that is over 1 million of possible cash that you are missing out on.
The Best Worst Job I Ever Had
Thursday, September 25th, 2008 | Uncategorized | 1 Comment
Up until a horrible experience at age 20, I was as ignorant about money as anybody else. I spent everything I had, never making a budget let alone thinking about investing. Anytime I was about to come into money, whether through gifts, or starting a new job I would immediately think of things to spend it on. I went to college and took on student loan debt. I worked part time jobs, but all of that cash fled my hands as soon as I got it. My typical thinking with money was “Ooooh, that would buy me a nice video game/dinner/CD/movie/clothes/gadget”. My jobs up until this point had been all minimum wage, but when I was 20 I got a gig at working at a steel mill making $14 an hour. My eyes lit up with dollar signs dreaming about what I could buy. This was more money than ANY of my friends were making.
The Best Worst Job I Ever Had
I immediately went out and bought a new car (I had to have a reliable car to get to work, right?). The day before I began my new job I had $3.49 left in my checking account. And at the time, I didn’t see any problem with that. I enjoyed working at the steel mill for about 10 days, when I realized that it was a polluted sinkhole filled with angry, bitter people. But the money was good, and I stuck it out. I looked into spending my first paycheck on getting my car windows tinted to look cool (I ended up not doing it. What was I thinking??). About a month into the job, I had my “money moment”. It hit me like a sack of bricks: I could never do this for my whole life - the dirty environment, the malicious people, the petty politics of work. I realized that unless I learned how to save and invest, I would be stuck spending every paycheck I ever got, forever bound to my miserable job. I went out and bought The First Book of Investing by Samuel Case to try to learn more.
It wasn’t an easy process to learn about money, and it certainly didn’t happen in one night. But slowly I learned to take control. I stuck it out with the steel mill for a little over a year and then politely quit. My new car had by then been coated in a grimy layer of soot, but as I was driving away on the last day I rolled down the windows and gave the mill the finger.
What about you, reader? Are you stuck in a horrible job too? Do you spend everything you earn? Envision yourself there for the rest of your life, and maybe you will have your “money moment” too.
Maybe I shouldn’t have flipped the bird to the mill - it had taught me a lot. If it hadn’t been so bad, I would’ve never been spurred to change. And the $3.49 in my checking account? I photocopied that line in my check register and carry it with me today to remind myself of my past. It was certainly the best worst job I ever had.