2011 – Page 8 – Beyond Dave

Don’t go it Alone

Many businesses spend lots of time and money blocking non-business websites from their employees. These businesses are trying to protect themselves from decreased productivity caused by high time-demand sites like Facebook, YouTube and twitter – as well as the problems caused by allowing access to inappropriate sites and the malware frequently found there.

Often the response from the employees to this restriction is anger. Employees grumble about not being trusted and being treated like children. Of course, if you are a business owner and your employees carry cellphones, you may have succeeded blocking the traffic from your network but you did not stop the access. I have spent some time on the management side of this problem and it is a sticky situation; you want to trust your good employees to be motivated and stay on task, but you know trust is not enough. Additionally, you understand that social media can be an important piece of your marketing efforts.

Unfortunately, most jobs have lots of boring or difficult tasks that are easily postponed by grabbing a few minutes surfing the web, checking your “watch items” on eBay or catching up with your friends on Facebook. Depending on the difficulty or boredom factor of the waiting tasks, a few minutes can stretch out to an hour or more without any problem.

I have recently made the move back to self-employment. I get to decide what I do and how and when I do it – and where my success is related directly to my productivity.

Guess who uses an internet filter now. If you want to get things done, be creative or just think – you need to focus. If you really want to focus, you need to eliminate distractions.

How to get stuff done:

Define the task and set a deadline.

Clearly define the objective. Are you writing a first draft or a completed report?

Need to make cold calls? Will you dial 15 numbers, make 10 connections, talk to 3 people or set on appointment?

How much time will you allocate to this task? Remember the task will grow to fill the allotted time. Set a count-down timer that you can easily view on your system or your phone.

Eliminate all distractions for the time period

Turn off email notifications (you should do this anyway).

Quiet the phone. Put it on DND; turn off the ringer or turn it completely off if you cannot ignore it.

Turn off your internet unless you absolutely need it for the task. If you’ve gotta have it, block your “time-suck” sites.

Freedom for Mac or Windows ($10) locks your networking for the number of minutes you set, up to eight hours. What to cheat? You’ll have to reboot!

LeechBlock for Firefox (free) allows you to block 6 sets of sites. You can block sites within fixed time periods (e.g., between 9am and 5pm), after a time limit (e.g., 10 minutes in every hour), or with a combination of time periods and time limit (e.g., 10 minutes in every hour between 9am and 5pm).

Put on your headphones; put up the “DO NOT DISTURB“ sign; close the door and make them leave you alone!

Focus fully on the task at hand

Stay with it. Calling? Then call; or sit quietly until you can. Writing? Then write; or sit quietly and refuse to get up until you actually write something. Don’t do anything except the task at hand. Remember why you want to accomplish this and get excited about it.

Count it down

Get it done on time. Check you count-down timer once in a while and see how you’re doing when focus fades.

Celebrate or recommit

You got it done! Yippee! Get up and take a walk, check that twitter feed and reward yourself. If you failed to accomplish your task, try to figure out where the train left the tracks and schedule a new session at a later time.

Focus takes practice; don’t expect to be perfect. Start with important tasks you really care about and set up your distraction-free environment for a short period of time. You will be able to use these techniques for harder tasks and longer periods as you progress.

The important thing to remember is to use every trick or tool available when you what to accomplish something. Don’t carry that credit card; don’t bring Twinkies in the house and turn off the internet when you need to get something done. You are a crafty devil and it takes a lot to keep yourself on track.

The Joy of Work

Several of the bloggers I enjoy espouse “minimalism” as a way to escape the need for a job – among other benefits. I can really get excited about some of the other benefits; for example I know renting or owning a house big enough for your stuff, rather than just big enough for you, can have long-term financial consequences and certainly, relying on the accumulation of stuff to feed your self-esteem is harmful. But to embrace simple living so that I could quit work? I don’t think so.

Work is what I do – not what I avoid. I met many of my very best friends through work. How better to forge and cement a relationship than by working side by side to accomplish or create something?

When I look around our self-remodeled home I see the results of many hard, but joyous hours of work. One of my best-ever summers was spent with my four young nephews building our dock. It was very hot and incredibility strenuous work – requiring the sinking of new pilings, the driving (by hand!) of about a bazillion nails for stringer joist hangers and also the hauling, cutting and fastening of a lot of very heavy composite lumber decking. We did not work for pay. We worked for the challenge of trying to build something way over our heads. We enjoyed puzzling out each problem as it arose (including how to un-stick the eight year old who had been jet sunk in the mud just like the pilings). We loved the team synergy.

I’m blessed to have been happy with my work for most of my life – be it corporate, small business or self employed. I love solving problems, being challenged, and making a difference. You can find these kinds of opportunities almost anywhere. If your current employment circumstances don’t allow you to experience the joy of work, then you are really missing out, plan a change. Do not indefinitely forgo the joy of work in exchange for money.

The Redshirt Wealth Building Plan

I recently had a conversation with a very bright, but self-admitted and purposefully undisciplined woman. She wants to do better with her money but does not want to change her ways. No Budget for her – No way, No how.

This presents quite a conundrum for a whiz-bang financial coach. Someone whispers they want to become wealthy; I’m all about finding a way to make it happen.

Here’s someone who professes a desire to “do better”. With a bit of conversation, we could grow that tiny seed of desire into a little sprout of a goal. Unfortunately, without a willingness to change, our sprout, in all probability, will wither and die.

This woman has a lot of wealth-building potential. She’s employed and in a position that holds promise for future advancement. She is not overspending on her basic living expenses; housing, utilities and transportation costs are all reasonable.

But she is not ready to change. Every dollar that finds the way to her hand is going to be spent on “good times”. She’s not going to make a budget and she’s not going to track her spending.

Enter the Redshirt Wealth Building Plan.

You know how a college basketball or football coach might hold out a very talented athlete their freshman year, allowing them to grow and mature a little more without losing eligibility? Well, we use that same idea here. Redshirt freshmen get to practice that first year; they just don’t get to play in the games.

Participants in the Redshirt Wealth Building Plan:

Stop borrowing. Redshirts may not borrow. Hide, cut up or give your mom your credit cards for safekeeping.

Embezzle Funds. No; not from someone else – from yourself. Open a savings account; ing is easy and online. Do it right now. We don’t ask redshirts to think much just yet. Decide how much you could live without each paycheck and make that transfer happen automatically.

Pay as you go. Live your life using your debit card and the money in your checking account. Don’t look at your savings, don’t even think about it and definitely don’t touch it.

Measure your Progress. Set an appointment with yourself every 60 days and ask yourself two questions: Can you increase your savings amount? Are you ready to make a commitment to get in the game?

It’s OK to give yourself some time to develop some muscle; but be sure to follow the redshirt plan so we don’t have to waste your wealth-building efforts digging out of a hole.

Bad Influence

When you were in middle school I bet your parents started eyeing your friends more carefully. They asked about their parents and how they did in school and what kind of rules they had in their home. If they saw a group of kids hanging at the mall or on the street corner goofing and smoking, they wanted to be sure none of them were your friends.

Your parents were worried about bad influences. They fretted about Johnny, who you might skip a class with, or Brenda, who might encourage you to drink that first beer – while they remained totally oblivious to the influencers that would torpedo your ability to accumulate wealth.

BMW, Lexus, Infiniti, Rolex, Prada, Dooney &Burke, Ralph Lauren, Sony and Apple are the influencers your parents should have warned you about. These influencers and others like them have helped way too many high earners become low accumulators of wealth.

Wealth is not how much you make and it is certainly not how much shiny, (and rapidly depreciating) stuff you have. Wealth is what you have managed to hold on to.

In The Millionaire Next Door, Stanley & Danko gave this little formula to gauge how you are doing at building wealth.

(Age x pre-tax Income)/10 Should Equal Net Worth

For pre-tax income include all sources, other than inheritance.

This formula is just a quick and dirty estimate of what your net worth should be. To be in the top 25% (where we all should want to be) your net worth needs to be twice the result of the calculation.

If you’re not in the top 25%, it has everything to do with your spending. Having been bombarded your whole life with slick ad campaigns about what purchases you need to make to be happy, you have fallen prey to professional influencers.

I have nothing against any of the companies mentioned. They all make great stuff, and if you are going to have stuff, at least have good stuff. I just want you to think. Just as your parents did when you were in middle school, I’m going to tell you to make your decisions based on what’s right for you and your future. Don’t do something just because everyone else is.

Evil Credit Cards & Brownies

If your progress toward your money objective has slowed, stopped or even reversed, maybe you need to examine your goal and re-commit.

We all struggle from time to time with focus. I know I’m struggling right now with some extra pounds. I can rationalize the why in 10 seconds flat – you know the holidays, the windy colder weather that doesn’t invite a good ride, been too busy to eat right, blah blah blah. The real reason I’ve put on these pounds is that I lost sight of my goal.

Losing weight and paying off debt are both about changing our behavior. If our old behavior did not include overeating and/or under exercising we probably don’t need to lose weight. If we had not over spent in the past, we wouldn’t have the debt. When we get tired or anxious or somebody bakes delicious brownies, it becomes very easy to fall back into our old behaviors of overeating or overspending.

Step 1 – Awareness.

Ok, my knees hurt, my pants don’t fit and the scale is registering numbers I haven’t seen in quite a while.

You pull those credit card bills out of the mailbox and tally them up.

Are you now painfully aware? I know I am.

Step 2 – Give a hoot.

Do I care that my knees hurt and my clothes don’t fit? Yep, I do.

How about you? Do you care that you’ve backslid from your goal?

Step 3 – Give enough of a hoot to do something about it.

This is the hard one. Do we care enough to make the difficult choices to give up something we want right now in order to get something we want later?

It depends on what the later is. You and I both need to clearly define that long-term goal. You gotta make it something worth struggling for.

My long-term goal is to be fit enough to hike the Grand Canyon down and back with my grandchildren. Since I don’t have grandchildren and I don’t have any say in the when; I’ll have to choose an intermediate goal that I can attach a date to.

Here it is. On or before May 1, I will ride my bike on a single trip for 100 miles in less than 8 hours. OK, so maybe this doesn’t sound like a weight loss goal; but it is. There is no way I could do a century carrying extra weight without my knees (and maybe my lungs) exploding. So, to achieve this goal I need to: a) ride a lot in the coming 100 days and b) eat carefully. If I do those two things the weight should take care of itself.

As shorter-term goals I’ll do a 50 mile ride on or before March 5^th in under 3 1/2 hours and a 75 mile ride on or before April 2 in under 6 hours.

OK, that was scary; now it’s your turn. What goal are you working on?

What can you do in the next 100 days that will firmly put you back on track to your goal? What will you accomplish by March 5? And by April 2?

In the coming days every time we feel the urge to backslide, we need to visualize that long term goal. Are we really willing to jeopardize that goal for this immediate want?

OK, now that we’ve got our new goals in place, we need to commit to them. One way to do this is to tell somebody. I think I’ve got that covered; how about you? You could just leave it here in the form of a comment- that would work. Get your friends to log on and do the same. Let’s do this together.

Hope

The world is a better place today. OK, so maybe not the whole world; maybe just this little tiny piece and maybe it’s not really better, yet- but there is new hope.

A very generous and talented friend of mine started her first “real” job today as the teacher of a middle school special needs class. This is a very hard job. Don’t believe me? Just try and have a conversation with a middle school kid. It takes work.

Morgan has a gift and these kids, who have had a difficult and rocky row to hoe, will flock to her. She will show them that they can live up to the limited expectations that small-minded people have for them or they can overcome their difficulties and be much more.

As someone who has been tested, Morgan has a testimony to give. A single mom with two young children and no money, she has worked and struggled and made-do for years to get her degree. She could have quit and waited to be rescued, but she did not.

These kids, our community and our world will be a better place – because when it would have been so easy to quit, she pushed forward. She has earned the privilege of teaching perseverance to those who need it most.

Winners Quit

Recently I re-read Seth Godin’s book, the dip. In this little book, Godin writes mostly to business people about knowing when to quit a project. When he says, “Winners quit fast, quit often, and quit without guilt” it flies in the face of a lot of what we’ve been taught. Godin advises that winners quit when their path leads to a dead end – but to persevere when they are just in a dip.

This concept of winners quitting, is one that also works in realm of personal finance.

The key of course is knowing when to quit and when to stick.

For some situations, this determination is easy. If your income situation has changed for the worse, whether due to job loss, hours cut or a reduction in bonus, I have some no-fail advice for you: QUIT! Quit your old lifestyle – Today! Do not eat up savings or take on debt to maintain a lifestyle you can no longer afford.

Given the doom and gloom pessimistic economic news, it’s surprising that so many people can be so overly optimistic in their personal life. High earners are particularly susceptible to this problem. I get this and I’m also optimistic; but let’s practice a little planning for the worst. Do not let stuff drag you under; unload it and when you land that great new job you can always buy more.

For other situations, the determination is much harder. Here in Florida in early 2011, 46% of homeowners with mortgages have negative equity. Wow! That needs to be said again. Almost half of the people in Florida who owe money on their home, owe more than they could sell the home for.

If you are one of these families, how long do you stick?

People often need to move when they graduate, retire, marry, divorce, get a new job, have children, children move away, or for a myriad of other reasons. At one time as many as 20% of all Americans moved in any given year. Today, the poor housing and poor job markets have been a factor in greatly reducing that number.

Faced with either a legitimate need to relocate or the inability to realistically make the payments, many people choose to stick in their negative equity home way past the time they should have quit.

While I would not advise anyone to default on their mortgage just because the home value has dropped, I also would not advise someone to indefinitely postpone a needed move just because their home is underwater. (The “How you quit a negative equity home” is very important, but not the subject of this post).

In much the same manner as Godin advises business people to figure out if the path they are on is a dip, a cliff, or a cul-de-sec; if you feel stuck in a financial situation you need to calmly and strategically do the same.

Decide in advance when to quit.

The underwater homeowner who can no longer reasonably pay the mortgage may decide to commit “x” number of dollars of their savings toward keeping the mortgage paid while trying to land a better job or short sale the house. When the money is spent, it’s time to quit. Deciding in advance takes the emotion out of decision day and helps prevent quitting in a panic.

Will quitting now allow you to win later?

If a better job, life or family situation is on the other side of quitting, you may need to quit sooner than later. Carefully weigh the cost of sticking – waiting on the market to recover vs. quitting and starting new in a better place. The unknowns of the marketplace make this calculation very difficult but we do know that while you can make more money you cannot make more time.

Recognize the cliff

Be brutally honest with yourself. Put your what-if analysis on paper. Quantify it. Review it with someone you trust. If the path you are on leads to a financial cliff, its way past time to quit.

Remember, there is no prize for not quitting. People will not cheer your dogged determination if the end result is failure.

How to Say No

One of the fundamental principles taught to lifeguards is to protect their own life and health. This same principle is vitally important when a loved one asks you for financial assistance.

Rule 1: Protect yourself – you are no help to anyone if your drowning loved one pulls you under.

One important way to protect yourself is never to co-sign a loan for a friend or family member. This is very easy in theory but surprisingly hard in practice. When someone you care about comes to you and makes their case about how things will be so much better for them if they could just get this loan; it is very difficult to tell them no. Saying no feels like a vote of no confidence from you to them. As unsure as we are of exactly what our loved one needs, we can be certain they need someone to believe in them.

But, there is a reason they cannot get the loan without a co-signer; the cold hard statistical facts predict that they will default on this loan. Co-signing puts you fully on the hook for the debt and places your relationship in serious jeopardy.

Loaning money to our friend or family member in crisis is likely to have the same consequences as co-signing. They may not be willing or able to re-pay the loan; placing you in the uncomfortable position of playing debt collector to someone you care about. This is not likely to end well.

When faced with saying no to a loved one’s request for money, try one of these strategies:

Make your refusal to co-sign or loan money part of your personal code of conduct. This takes some of the sting out of your refusal. You are not refusing to co-sign this loan, you refuse to ever co-sign any loan. Stating this part of your personal code occasionally when the opportunity arises may save you from ever being asked in the first place.
Blame it on your financial advisor. No sane advisor has ever recommended co-signing a loan for a friend or family member.
Offer something you can do that will help resolve their issue “No I cannot so-sign that car loan, but I could give you a ride to work for a month”.

Your goals need to be to protect yourself, protect the relationship and to leave a door open in case they really need help – not just a quick solution. There is nothing wrong with giving money to someone in need as long as: a) you can afford it; b) you are fairly certain that giving will not just enable continuing their bad money behavior.

If you’re the kind that feels bad for saying no, stop! Chances are you did this person a great favor; a few more no‘s and they might just starting looking inward for the solutions to their problems.

What we need here is an Epiphany

When you were seven you said “Please” and “Thank you” and “Yum, these are the best beets I’ve ever had” to your Grandma – not because you meant it, nor because Grandma’s feelings were important to you; you did it because you were told to.

And somewhere along the growth chart you (hopefully) started internalizing those behaviors. You began to understand that kindness and manners are a display of respect and consideration for others. You learned that others mattered. But until you got to this level of understanding, you faked it.

Faking it is a perfectly acceptable way to learn wanted behaviors.

An epiphany is the opposite of faking it.

With an epiphany:

The 350 lb woman who, after years of battling the health problems caused by her weight, has an experience that causes a sudden intuitive leap of understanding that allows her to find the motivation to lose the weight.

The smoker who, for 25 years, ignores the pleas of their parents, their spouse and their children continuing to smoke until one day something said in an ordinary conversation causes a sudden intuitive leap of understanding, and they quit.

The family that happily bounces along acquiring debt and not saving until some ordinary but striking occurrence causes them to realize this is not smart.

You want to be healthy and you want your family to be financially secure; but you just can’t seem to have that ordinary but striking event to bring about a sudden intuitive leap of understanding.

It’s OK. Just fake it. You already know what to do. Eat right, exercise more, live on less than you make. Even without your epiphany, you may find your happiness.

It’s all about what you want

Finally, we get around to your favorite subject. Personal Finance is very personal. What you want and what I want may be quite different.

Winning with money is about using your earnings to get what you want from life.

As long as you are progressing toward your goals at a pace you are happy with, there is no need to feel guilty about lattes, dinners out or your fancy car. You should spend money in ways that make you happy. Just don’t make the two fundamental errors that will prevent you from winning.

Fundamental Error #1: Failing to set Personal Financial Goals

This was me, and I bet it is you too. To count, a goal has to be clearly defined, measurable and have a completion date attached.

I want to retire comfortable someday is not a goal; it is a Dream.

I want to retire with a monthly income of $2500 in six years. That’s a Goal.

I want to get out of debt – another Dream.

I want to be completely out of debt, excluding the house, within 36 months. – Goal.

I want to buy a house – Dream.

I want to save $20K for a down payment on a house by this time next year – Goal.

Ok, you’ve got it. Now take some of your dreams including your “great-big-won’t-happen-for-a-long-time-dreams” and turn them into goals.

Fundamental Error #2: Failing to have a plan

When people make error #2, their behavior does not align with their goal. It is not that they lack self discipline; it’s that they have no plan.

If your goal was, I want to save $20K for a down payment on a house by this time next year, how are you going to do this?

How much a month do you need to save? Do you need to cut back expenses to get there? Can you increase you income? How?

Break your goal down into the little actions required to get there; draw yourself a map. Put in on paper and then tell someone about it. Check back on your progress frequently.

Whether you are on baby step 1 or 7, you need to have a goal if you’re going to win.