27 
30 | § ¶2007 Financial New Year Resolutions
-- Five Again
Last Year I started doing financial resolutions. Some other financial bloggers have them and I decided to follow suit even if I haven’t done normal New Year’s Resolutions in a long, long time.
For 2007 I plan to:
- Change Jobs – My 10+ year career has been very satisfactory. But after 10 years on the same company it is about time I try new things. I have to accomplish one of three things:
- Go into consulting – start my own business, providing the services I know how to provide and trying to grow the business into one in which I can have other consultants doing the extra work hat I can secure.
- Big company, lots of money – get more money, plain and simple. Make loads of cash to feed my investments.
- Startup – about the same money and a load of options. A place where I can feel the thrill of a very small company that I can make grow, and where I can quickly climb the corporate ladder due to my vast experience and hard work.
- Cash Only (Almost) – My brother experimented this year with a “Fun Account”, and I may want to incorporate some of it in my own life. The concept is simple; all discretionary expenses come out of a Debit Account where each month you deposit your discretionary money. Carry-overs from previous months are used for big expenses – travel, computers, etc. And when there is no money, there is no more spending – stay at home reflecting about your spending habits! I am doing the same this year. No more use of credit card! I do not care if they do not give me points/miles! If I want to work for myself some day, I need to learn how to live with plain, cold, hard cash. (Note: it is not extremely difficult, as I always had the cash in a savings account to pay the card in a sudden loss of job, but this time it is out of principle). Credit card will still remain there, as I need to use it for internet purchases, very few subscriptions, and other things in which I do not want to expose a lightly secured debit card – but as always pay full balance every month, if not sooner. For everything else, use the Master Card logo debit card.
- Dividend Income – Increase my yearly dividend and interest income by $2,000 a year. This means that on top of what I currently earn in dividends and interest (little more than $6,500 a year) I need to add $2,000 more to a total of $7,500/year. I am setting one of the 2008 financial resolutions to be $2,500 more up to $10,000/year in dividend income. This may sound like small money, but it is not a small feat. I do have a moderate growth portfolio mostly invested in stocks – a lot of them in retirement accounts which I do not count for the dividends amount. Balancing considerable growth with steady income is a challenge and an art I want to master. It is gaining perpetual income, vs. my current model that may require eating up into assets if I decide to retire today. The more dividends I earn, the easier is to try new and risky business ventures in my life.
- Emergency Fund – 6 months – I did 3 moths of emergency savings this year. I want six now – at $4,000 monthly expenses this means $21,000 ($24,000 – $3,000 in dividends) that I have to secure – double of what I have saved for that purpose. If I want to engage in risky business ventures in my life I better prepare myself for the hardships my actions may bring.
- Will, Living Will, Durable Power of Attorney, Health Proxy – This is one item I didn’t completed last year. Shame on me. It is a very simple set of documents, as all of the decisions have been taken already. It is all a matter of executing, and executing is all that counts – for thinking or even working a problem is worthless if it is not finished.
23 17 | § ¶The Teacher is the Problem, Not the Student
-- It is My Job
The other day I was talking to one of my primary financial knowledge protegees. I explained to her that she was doing well in her life, but had to improve. She went ballistic on me expressing that she doesn't has any debt, she lives well below her means, she is saving around 40% of her income, and is doing a reasonable effort to get a better job. She asked me what else I expected her to do, as if I was a cruel and inhumane person that asks the impossible from people.
I told her she wasn't doing one thing: understanding how to secure a stable life for her and her future family. She was blindly saving without knowing if it was too much, too little, or in the wrong way.The worst part is that it didn't clicked. I just got another barrage of complaints and expressions.
I did failed at explaining what it meant to “secure a stable life” for people that aren't even found or even born. It is a complex idea even for someone from a complex profession like hers. And even if I summarize it in an article today I bet I would get quizzing looks from many people.
Securing a stable life for a family is making sure that you have a plan on how to create enough worth to sustain you, your partner, any kids you have, educate kids with higher education, and retire comfortably (including increasing health costs). It does not mean that you have to have the money now, but you need to know how you will get it.
How someone gets there is up to the individual. Some people can generate massive amounts of cash at once, store them under the mattress and use them over the lifetime. For the rest of us it means learning things like the time value of money and how to invest the money in instruments that build up the wealth. It means to learn how to take calculated risk. It means finding a balance between how aggressively you advance in your career and how much you enjoy life – with a clear idea of what your needs are. It means visualizing life, before it happens. It means the almost impossible task of predicting a future that will certainly be different from the original plan.
The more you think about the idea, the more you think about why someone will avoid it. People will come up with many excuses, including that it is impossible to predict what life will bring us. I certainly have answers to that, and many other questions. (A plan is like a road-map – you know where you are and where you want to go, and you know how to get there – and to any other destination you may want to go in between or in the end.)
All in all, it is my job to convince her of this need, and no-one's else. Not even her job to understand, it is my job to help her understand. My father often says:
If the student failed to learn, the teacher failed to teach.Back to the drawing board in my approach at helping people to seek financial understanding.
19 8 | § ¶I Wonder if People Date Like They Job-Hunt
-- Preparation-wise
My brother once mentioned that job hunting was like dating – you are trying to get the other person to like you enough to establish a medium to long term relationship with you (one is professional, and the other one is sexual – and most of the time they are best handled separately). I tend to concur, and I think many other people have made similar remarks.
Although the principles are the same, I wonder if people follow some strategies to help them prepare themselves for both situations. I consider I have some more expertise on job hunting than on dating, and this article is half advice half questions about life.
Let me elaborate on some common job hunting strategies I follow, and how they may be compared to dating strategies:
- Study the Market - I choose one or two positions that would be of interest to me and narrow down the target companies. For example, for me it is Pre-Sales or Professional Services for Information Technology Management software companies. Notice that I did not said just about any software company, nor any kind of engineer job. The reasons I narrowed down the market are twofold: I like the market and I feel comfortable handling myself in that market. Do people narrow market and roles when dating? For example, if you feel comfortable on a particular place/activity, do you date-search in that place/activity? (bars / church / tennis / beach / supermarket / college / internet). Do you narrow down the market to specific things, age groups, interests, believes, morals, values?
- Research the Target - When I am about to get an interview I research as much as I can about the target company. I read the website, news releases, and financial statements. I Google search as much as I can about the target company. I even try to find who the managers are, so that I can find out about their biographies (almost everything can be found online). If I can identify specific interests that these people have, I refresh my memory on those topics, and I learn about those I am not completely comfortable on (Wikipedia is great). Do people research their potential dates? Nowadays is very easy to search for someone on the internet. If you type my name you can probably find my resume, this writings, and my interests. Do people search on Wikipedia about the topics that may be of interest to the guy/girl of your dreams, just to be able to have intelligent conversations about what that person may like/dislike?
- Follow Up - After an interview, I send a note establishing my interest and qualifications for the position as well as scheduling next steps, if any. How do people follow up dates? Does it makes sense to carry up momentum by scheduling next meeting? Should it suffice with thanking for a delightful evening and expressing how fun / enlightening it was?
- Clear Negotiations - I negotiate every detail I can think about for an engagement with a company upfront. Things that are “not negotiable” have to be stated, and maybe compensated in other ways. Do people set relationship expectations upfront? This is another tricky issue. Some relationship may be so ill defined that it is very difficult to know what to expect. If you like adventure, it may not be too bad. Otherwise, there may be things to learn.
9 18 | § ¶Coach Others to Coach Yourself
-- Focus on Action, not Just Rhetoric
It is very easy to talk to friends about ways to improve life. In every party or social occasion I hear tens (literally) of ideas of how I or someone else should change my or their life to experience an overnight improvement. Stock tips, business ideas, house improvement, relationship advice, you name it. Most of it sounds very interesting on conversation, especially if you have had a couple of drinks already, but where it all fails is on the execution. Next day after the social interchange, everyone is grinding their way through the same job, having the same relationship issues, surviving under the same leaky roof, and still holds a financial mess in their hands – at least at the same level they where the day before.
It is nice to hear about how much people know about improving the quality of life. But it is a lot more effective to actually work towards achieving. Friends and family have a very powerful potential to improve the lives of each other, but only if you actually sit down and get to do the improvement.
If you really care about your friend doing a small home improvement that will change his quality of life, offer to help with it. If you think your friend can job hunt in a more efficient way, offer to sit down with him/her and go through the process a few times. Essentially at the moment you offer the smart-rear suggestion, schedule a time to go through the improvement process. Show commitment and show up at the scheduled time and carry the effort through to completion. You will really leave a lasting impression on your friend, and you will most probably learn in the process.
This is the difference between boasting about knowledge and “coaching”. When you Coach, just like an athlete coach, you are with the person doing at least a portion of the actual work that needs to be done. You also follow up on the progress, be it every week or every month. You are there to offer continuous advice, to support the person on the small, intermediate failures, and to celebrate success. You are there to offer suggestions and ideas just when they are needed most: during the learning process of a new skill or during a difficult work to be done.
The good thing is that you do not need to know everything about a topic to coach. You certainly should have some experience on it if you want to be effective, but just being there to offer support and advice helps a lot. First of all, being there holds the other person accountable to finishing the task – a great step ahead. Secondly, two persons may think better than just one, and that’s another way you can help a lot. In the process you will most probably end up with a higher level of understanding about the topic that you had when you started. Chances are that the next time you do a similar task to the one that you just coached; you will do it in a better way.
This is just what my wife and I have experienced over the last couple of years with our two younger brother/sister. By no means are we geniuses (even when sometimes family members think we are). But we decided to support them on job hunting, career, and personal finance skills. In the process we have learned a lot, way more than we ever thought. We have grown as individuals and as professionals. They have taught us more than we expected in topics we didn’t even knew we wanted to learn – but then enjoyed it. And I must say that in two years, we have grown personally and professionally than in any other two year period in our lives.
Next time you are about to offer a life changing suggestion at a cocktail party, think about the possibility of coaching that person into actually achieving the goal. You may find you will grow more than you ever expected.
11 18 | § ¶2006 Financial New Year Resolutions - End of November Update
-- One Month From Year’s End
Early in the year I shared some of my 2006 Financial New Year Resolutions (just about the only resolutions I make, as I am not a strong follower of the resolutions tradition). To hold myself accountable for what I did said, here is my update of how I am doing:
1. Increase Dividend / Interest Income
Goal by End of 2006: $6,000 / year.
Current Situation: $6430.5 ($6276 in dividends) / year
Goal accomplished!
2. Consolidate Retirement Accounts
Early in the year I had disparate IRAs and retirement accounts scattered across multiple providers. I am still not using a single provider, but I am at the level I expected to be when I established this resolution. My workplace 401k is managed by Fidelity, the employer’s choice, and a good choice overall. My money from my previous company 401k was rolled over into a brokerage IRA I have with TD Ameritrade, and I still hold a retirement money on the Vanguard 500 fund at Vanguard. It is now a manageable situation that given the levels of investment does not cost me extra money in low-balance fees like I was suffering before.
Goal accomplished!
3. Will / Living Will / Durable Power of Attorney / Health Proxy
Shamefully, I haven’t done anything on this topic. It is a lot easier to plan for enjoyment of the money invested than to plan for the unfortunate situations that life brings us.
Shame on me.
4. Car
Goal: Car Down payment Fund.
Current Situation: Bought a new (used, low mileage) car already, and I am paying the same amount I was paying when I bought the old car – beating inflation?
Goal accomplished
5. Emergency Fund
Goal: 1.5 months of monthly expenses (based on a $3,750 to $4,000 level).
Current Situation: I have 3 months salary saved.
Goal accomplished
What is next?
Chances are the 2007 Financial Resolutions will include more dividends, more emergency funds, and some carryover from the “Will / Living Will / Durable Power of Attorney / Health Proxy” resolution. As for the other three resolutions, I am open to suggestions.
10 16 | § ¶Unquoted Job Wisdom
-- Passed on by a workmate
”You need four things in a job”, I was told by a colleague I respect. You get less than four and you will not be satisfied and have to take corrective action. You get only two of them and you better get a different job. If you get only one or none of them and you are just struggling to get a check and pay your obligations.
The four things:
- Money - You need enough money to meet your realistic goals, to feed, house, and clothe yourself and your family, and to save and secure your future.
- Fun - You need to enjoy the type of work you do and interacting with the people you work.
- Professional Growth - Learn how to do new things and be more effective at the things you do. Become a more valuable professional in your area.
- Personal Growth - Make sure that your exposure to the business environment helps you become a better individual. Become better man/woman, father/mother, husband/wife, friend and citizen of your community, country and the world.
I am not sure where this guy learned this or where he read it. Maybe he got it from the business rag he was reading on his commuter train on his way to work this morning. One thing I am sure, it is full of wisdom worthy of being repeated by him and now by me.