Three paths to financial abundance

Common advice, common results
I shake my head when I hear most "experts" talk about getting ahead. Their advise is almost always the same: "reduce your spending to the bare minimum. Maximize the amount you save. Invest in good mutual funds for the long haul."

Every once in a while you hear someone who focuses on increasing your income. Most of the time it is based on working harder and longer. Often it includes being more productive.

Don't get me wrong, it isn't bad advice. For 80% of Americans, it is a step in the right direction. Considering the rampant abuse of credit cards, it is their path to salvation.

“There are two ways to increase your wealth. Increase your means or decrease your wants. The best is to do both at the same time.”
Benjamin Franklin

Path 1
This is the most common path you see personal finance guru's advise. This is what you hear from the frugal blogger community. It is 90% of the help Dave Ramsey and Suze Orman give.

The concept is basic: reduce your expenses below your income. Interest and penalties are unnecessary expenses, so they must be eliminated.

While this is the foundation for personal finance, it is missing a key element to build wealth. By itself it leads to a safe and stable life of mediocrity. Yes, you can become a millionaire by using this path. It just won't happen until you are too old to enjoy it. And how much will your nest egg be worth? By then a million dollars will be the equivalent of $700k. While this is a good chunk of money, it leads to a lower middle class retirement. Not the golden watch we all dream of!

Path 2
Ahh, this path is riddled with scams and charlatans. Don't worry about expenses, increase your means. On the surface this sounds great. Keep enjoying the latte. Drive cars you can't afford. Live in a house that is too big for your income. Trust that you will make enough to pay it all.

There are some real experts that tell you to focus on increasing your income. Michael Masterson is one. Robert Kiyosaki is another, though his status as "expert" is questioned by many. Most of their focus is on increasing your pay or starting a side business.

This road has major flaws.

• First, if you can't manage your finances at $30k/year, it will just be magnified at $300k. This is a fact and has been proven in study after study. The typical person's expenses increase faster than their income. What was a financial problem at $30k becomes a downright crisis as the income increases.
• Living within your means is safety. Your financial security is inversely proportional to your debt. For the non-math majors, that means that as you decrease your debt, your life becomes more secure and stress free.
• Dollar for dollar, decreasing expenses results in more free cash than increasing income. This is due to income taxes.
  
• The second path is littered with get rich quick schemes. There are legitimate businesses out there. Some of the advice is good. 97% is bunk.
  
• If you do find or build a legitimate business, you need more than just income. You also need expense control and budgeting. Hmmm...Doesn't that sound like personal finance?
• There is truth to the belief that material things get in the way. They clutter your life. They increase your expenses. They are an emotional drain. I'm not saying we should live like monks. We should just be careful what we bring into our lives.
  

Path 3
This is Benjamin Franklin's path. Decrease your expenses. Increase your income. This is the best of both worlds.

Dave Ramsey (and similar experts) touch on this, but often it is to help get you out of debt. "Take a second job to speed up your debt repayment" is their mantra. That is great to get you out of a bind, but is not a long term solution. You work 40 hours a week at your day job. You do 20+ hours as a pizza delivery guy. That doesn't leave you any time for family and fun. Once you are out of debt, this is not the way to lead a rich and balanced life.

There may be many ways to bring in more money, but I find two to be most effective.:

1. Earn more at you job: What are your doing to earn a raise or promotion? Your compensation is based on your contribution. You must first increase your contribution if you want more pay. And remember, the training you receive while on the clock is to do your current job. It is the time you spend after work that will help you get ahead.
   
   Another thing to consider is whether your pay is appropriate for your industry. Often you find that other companies are paying more for your skills. If so, you have the justification to ask for a raise or find another job. For more info on job hunting, check our my post 11 Steps to the Job of Your Dreams.
   
   
2. Start a side business: My advice is to practice what Michael Masterson calls chicken entrepreneurship. Start a small business on the side. Stick to an industry you know well. Stick to your existing skills. Find a niche and identify their needs. Build your business around filling those needs. Start on a shoestring to minimize your risk. This topic is far too in depth to be discussed in this post, so look for it in the near future.

5 Ways RSS Can Save You Time

This morning my wife and I were talking about RSS. This is definitely a "told you so" moment. Several months back my wife told me "we need to look into this RSS thing." I downplayed it, and didn't see how it would improve my life. Why figure out a RSS reader when I only check a couple sites daily?

If the self proclaimed compute geek doesn't understand it...
The funny thing is that I'm a computer geek. I always have been. Heck, I started programming back in 1982 on a TSR80. Nothing has changed since, and I still love playing with C# or Visual Basic.

Fast forward to today
I don't know how I would get by without RSS. Once I started reading blogs it became invaluable. I can now keep up with the score of blogs I read daily in a quick and efficient manner. And now that I am a blogger, it makes it easier to reach my readers.

How RSS can save you time and make your life easier

1. It saves you time: It is much quicker to have all your blogs and news sites sent the info to you. No more surfing from site to site. And if you use a reader like Google Reader (my personal favorite) you can skim through the feeds quickly. Not interested in the topic? Skip it!
   
2. You are in control: You don't have to give out your email address. No personal information. You simply subscribe and start receiving information. When you want to stop receiving the info, a few clicks and you are unsubscribed.
   
3. Simple: All you have to do is click on the RSS icon .
   
4. Privacy: Since you don't give out your email address, you don't receive spam. No more emails about increasing your libido. No more emails about fake Rolex's. No more worrying about the loopholes in a site's privacy statement.
5. You already use it: It may surprise you but you are already using RSS feeds. Do you have a Yahoo / MSN / Google homepage? Did you ever wonder at the modular design, and at how you could add other news sources, sports scores, stock info, and the weather? These are all RSS feeds.

How do I read RSS feeds?

• You can use a service like MSN, Yahoo, or Google and set up your homepage.
• You can use an aggregator like Bloglines.
  
• Use a stand alone reader like Google Reader (my favorite), NewsGator, or Feed Demon.
• Use Foxfire or the latest version of Internet Explorer. Both have RSS capabilities.
• Integrate into your email program. The latest version of Outlook comes with a built in RSS reader. If you use an older version, programs like NewsGator will work inside Outlook.

How do I sign up?
The easiest way is to click on the RSS icon . Most blogs use a service like Feedburner to make their feeds more accessible. Follow the direction and in a few simple steps the blog is delivered to your reader.

How almost having a nervous breakdown changed my life

Seven months ago I read The Four Hour Workweek by Timothy Ferriss. It was a major turning point in my life, and fit well with several major changes I was making. I had already shifted from a work harder and longer to make more money mindset. I was looking to gain a level of freedom in my employment. I wanted the freedom to be able to work anywhere in the world and to chose my hours. All this without a drop in our standard of living. His book shifted my view and further clarified what I wanted to accomplish.

Then came the stumbling block
I was in sales and already had a great deal of freedom. I was not required to be in the office. One major obstacle down...and it caused another. To do my job I need to meet with my customers. That requires me to be in Houston. It can't be done if I spend two months in Cypress.

The other challenge was with schedule. How the heck can he get down to four hours a week? Sure, I could probably cut out 10 hours if I was focused. That makes it a 40 hour work week. 20 hours? No way!

Our solution
We decided to start a side business that would eventually replace my day job. This is easier said than done. We were determined to do this while maintaining a balanced life. That meant I couldn't let any obligations drop. Racquetball...I still played several times a week. Exercise...another daily demand. Our kid's activities...lost several more evenings. Work...I cut back to 40 hours per week but heck, I need to feed the family!

The end result was that nothing got done well. Everything was a chore. I was stressed beyond belief and no one was happy.

Snap!
Finally it all came apart. It was a case of too much to do and too little time. On top of my already busy schedule I had a major racquetball tournament that took up my entire weekend.

That doesn't mean I didn't try. Unfortunately I didn't get the critical things done, and what I did wasn't done well. My mood tanked, I couldn't sleep, and I was spinning out of control.

Calling it a nervous breakdown is a bit extreme. There were no men in white coats. I wasn't taken away in a sleeveless jacket. No rubber rooms. No medications that had me drooling and incoherent.

What did happen was my wife and I had a deep conversation that lasted into the wee hours of the morning.

And something clicked
I finally let go of my 40 hour per week mindset. I shifted to a mindset that focused on accomplishing important tasks. The rest just won't get done. I did some soul searching and identified the areas I valued. I assessed my job and identified the activities that were important.

Then came the hard part. I cut my work week to 20 hours. This freed up time to do the other things I wanted to do. Build our business. Get caught up on the household repairs and upgrades (I like working with my hands). Play racquetball without feeling guilty. Watch the Pittsburgh Penguins thump the Ranges in the Stanley Cup playoffs.

The amazing thing is that I got better at everything. I started posting to this blog on a regular basis. I accomplished more at work once I ruthlessly cut all of the non-important tasks. More sales equals more commission. I had more time to work on our business. I have more time to do the things I enjoy like racquetball. And last weekend I was able to get away and had a wonderful time at the beach.

None of this was unknown
This was my latest life lesson. I believe life will keep throwing the same thing at you until you figure it out. I've know about Pareto's Law for years. I knew about goals and prioritizing my day. I knew that it didn't matter how long or hard I worked, what mattered is what I accomplished.

Knowing is one thing. Doing is another. Sometimes making the change is easy. Sometimes incremental improvement will do the job.

Sometimes it takes a crisis...or a breakdown.

11 Steps to the Job of Your Dreams

I was reading a post by Ramit @ I Will Teach You to Be Rich yesterday and the question came up

" I am in college, but have lots of free time, so I can work full time at a startup plus add in a lot of extra hours (I know how startups are) on site or by telecommuting.

I applied to a few, sent my resume, etc.. but the same thing always happens. They want a portfolio.. links to things I’ve worked on. I am a programmer, PHP/Rails/C/Ruby/etc.. but I don’t have a degree in anything related to CS, and no professional portfolio.

I’m thinking the only option I have is to get a regular $8/hr job, while working on more and more projects in my free time. Enough projects to get a startup interested in me."

A similar post also came up on JD's blog Get Rich Slowly as JD had a chance to speak to 70 graduating seniors.

How to Not get the Job
If you like wasting time sending out endless resumes, be like everyone else. Go to Monster.com and apply to everything you see. Don't take the time to research the company. Don't modify your resume to fit the position. Sit back and wonder why your phone doesn't ring...I call it the shotgun approach to job hunting.

Or you can do something even worse. Use a resume blaster. If Monster.com is a shotgun, this is a nuclear device!

If you want a job, don't apply to job postings
It only gets you thrown into the black hole known as Human Resources. Their job is to screen out applicants to a reasonable level. This is a case where you want a sniper rifle, not a shotgun. It may seem counterintuitive, but the fewer jobs you pursue the more successful you will be.

11 Step Strategy to Land your Dream Job
Here is my 11 step strategy. It has almost always gotten me the job. Everyone I know that has used it found it to be the easiest job search of their careers.

It may seem like more work, but it isn't. You put in 10 hours up front and blow away your competition. You impress your future boss. You go in offering a solution to their problems, not asking them to help you with a job.

You also find the "hidden" jobs. The best jobs are filled internally. If they go out to the general public it is because they are required to do so by HR. They already know who they want to hire.

1. Identify 10 companies you want to work for.
   
   
2. Do basic research on these companies and the industry. Talk to friends. Ask family what they know. Google them. Your goal is to weed it down to 3-5 that are strong candidates.
   
   
3. Now you start the real work. Dig deep into each company. Go to the library and research them. Look up news articles and press releases. Get their annual reports.
   
   
4. Do the same for the industry. You want to be an industry expert.
   
   
5. Research their competition. Know thy enemy...
   
   
6. Get an informational interview with several people in the company. You need to know more about the company and your future boss. You may find you don't like what you see, and now is the best time to change your mind.
   
   Do not try and turn this into a job interview. You need to be honest and be doing research. Often this will lead to an interview. They may ask you back for an official interview, but you are not ready yet. Push it out a few days out so you can get ready.
   
   Not only are you gathering info, you are getting to know the management team. You want to go in as a known candidate, not as one of the masses sent by HR. Also, if you meet several people and come across informed and capable, multiple jobs will appear.
   
   
7. Put together your portfolio focusing on how you and your skills will help the company succeed and grow. Things to include:
   
   • Resume/CV
   • Letters of recommendation: go to family friends, coaches, professors, ministers, etc...
   • certificates of accomplishment
     
   • diplomas you have earned
   • a copy of your transcript
     
   • executive summary of the company
     
   • executive summary of the industry
     
   • executive summary of the competition
     
   • summary of the projects you have worked on (listed last because it is the least important thing).
     
     
8. Think of ways you can help the company. Come up with several thoughtful questions about the company and the interviewer. Go through common interview questions and come up with good answers. Practice with friends.
   
   
9. Call your future boss and tell him you love the company. Let him know you have been researching the industry and think you have some ideas to help them ______(fill in the blank with your newfound industry knowledge and info from the informational interviews). Be polite and professional.
   
   
10. Go dressed in a suit. Shine your shoes. Get a hair cut. Look your best.
    
    
11. Send everyone you meet at the company a thank you card. Don't email, write it out by hand.

7 ways losers win

You have spent months preparing. Your game has improved. You know your strengths and weaknesses. You are conditioned and fit.

Your first game you almost blow. You start strongly and then let up a bit. You don't give up, but just ease up on the pedal. Your opponent pulls ahead and you have to dig deep for the win. Lesson learned, you drive into game two and win the match easily.

The next match isn't so easy. Your opponent shouldn't be in your division...he is too good, and everyone hates a sand bagger! You dig in hard and give it everything you have. Unfortunately it isn't enough. You can't quite find a way to get past him. When you look to your coach/fans you see it in their eyes-game over.

Your third match should be easy. You are better than your opponent. You know his game. You both play your best, and it is an epic match. You both strain your bodies to the limits (boy will you hurt tomorrow). You go up strongly in all three games, but just can't close it out. Your opponent just wants it more.

Three matches, one win, and you are out.

This weekend I played in the TX regional racquetball tournament. Results were mixed. Compared to last year we were vastly improved. I finished about where I should have based on my skill and ranking. That being said, I did not win. In fact, I lost a game I should have won.

That being said, I took several life lessons out of it. I am a strong believer in learning from every experience. I never view it as a failure because I can always learn something. This weekend I learned seven things that can be applied to any part of your life:

1. Measure your performance to see the improvement: I have improved dramatically. Last year I entered at the same level. I thought my game was good. I quickly found out how wrong I was. I did not belong in this division. In fact, I was not good enough for the next division down.
   
   This year was a different story. I did not do as well as I liked (expect the best but plan for the worst). That being said, my skill had improved to the point that I belonged at that level. One of the reasons I enjoy tournaments is that I can gauge my improvement.
   


2. Small, incremental improvements interspaced with major leaps forward: I am a firm believer in continuous improvement. Every time I practice or play, I have a skill in mind that needs work. It is usually a minor improvement. Just 1% more accurate. Just 2% harder. Just 1% smarter. This is compound interest applied to personal development. Over a year, it results in a 372% improvement. That is only taking into consideration a 1% improvement playing/practicing an average of twice a week. Imagine how far you can go if you make that 2% every day of your life.
   
   This doesn't take into consideration the occasional leap forward. Every once in a while something clicks. You now "get it." Maybe it is understanding court position better. Maybe it is swing mechanics. It doesn't matter what it is because you suddenly leap forward. You
   move up as much as all the minor improvements combined.
   


3. Don't let up: I almost lost my first match because I eased up. It isn't like I started playing left handed. I just went from giving it 110% to about 95%. In my third match I couldn't close the deal. My opponent played harder the closer I got to winning. He wanted it more and it was enough for him to beat me.
   


4. Attitude is everything: My wife watched my son play in his finals with me. She pointed out that he looked to me on every missed shot. I was shaking my head or telling him what he did wrong. What he needed from me was support. He was having trouble getting his head in the game. He needed me to help him get his attitude right. I flashed back to past matches where I needed support. I missed a shot. My opponent was pulling ahead. I look up to the crowd and see my son shaking his head. I see my friends putting their heads down in frustration. Wow, what a paradigm shifter! I changed my approach and gave him love and support. I focused on the positive and what he wanted to do, not on what he was doing wrong. The results were magical. He came back in game two and almost tied it up. He won the tie breaker and the match.
   
   My third match-the one I should have won-was a mental loss. I had a positive attitude, but it was defensive. You could say it was kind of positive. I was thinking "I am up 13 to 7. I only need two points to win." I wasn't thinking about losing, but I wasn't determined to win either. My opponent was, and he was able to pull a win.
   
   And your attitude is contagious. Your attitude doesn't just affect your performance, it affects everyone around you. Look at my son's match. When I was critiquing his game in my mind it pulled him down. When I was focusing on the positive and being 100% supportive it helped him get his mind back in the game.
   


5. Relax: You play your best when you are loose and relaxed. Tension only gets in the way of performance. It also takes away from your enjoyment.
   


6. Enjoy the process: The best part of the game is that I love it. I love the challenge. I love learning new skills and improving old ones. I love meeting new friends, and getting a chance to see old ones. While I enjoy winning, it isn't the reason I do this.
   


7. Take time to learn the lesson: Life will throw the same lesson at you time and time again until you learn it. Take time to review your results. What did you do right? How could you improve? Then relive the experience as if you did it perfectly. Absorb the lesson, and then let it all go. It is time to move on!

The Real Housewives of Orange County...In Houston Texas

Designer handbags. Primped and pampered. Fresh from the salon. Recent trip the the friendly neighborhood plastic surgeon for a minor "augmentation."

Driving up in their new BMW. Just moved into a bigger house in a more exclusive neighborhood. Do they need more space? No, just one kid. That's why they need 6,000 square feet...

God help you if you are drawn into a conversation. So shallow I've seen puddles that were deeper. Who is dating their friend's daughter. What happened on the latest episode. Is so and so having an affair?

Popularity is everything. This is the high school in crowd on steroids. Who do you know? You can't talk to Ernest because he lives in (pick your nice but less than desirable neighborhood). Positioning their kids to be more popular so they look better, never mind the lifelong impact it will have.

No, this isn't TV
This isn't Beverly Hills. It is Houston, TX at a youth sports game. What do the husbands do for a living? Doctors? Lawyers? Investment bankers? Some are mid level managers or minor executives, but most aren't. One is a customer service manager making a whopping $50k. Another is a low level sales man who does just a bit better. One is a carpenter.

Look closer and you see a bit of desperation in their eyes. Try as they might, they can't forget the massive debt hanging over their heads. How much fun is that BMW when you are always working overtime to make the payments? Is there a purpose to their lives, something meaningful to get them excited about tomorrow?

What happens if their hours at work are cut? What happens if they are laid off? The upcoming recession strikes fear into their hearts. No savings, credit cards maxed, and huge monthly payments...How long before the house of cards comes crashing down? What will the neighbors think?

Our old friend Pareto
This comes back to the 80/20 principal. 80% of society just doesn't get it. 20% does, and I include my readers in this group. That is why we live within our means. That is why we are debt free. That is why we have the savings to weather any emergency. That is why we advance, but keep a balanced life perspective. That is why we often start our own businesses.

And that is why we don't count these people our true friends. We may be acquaintances. We can smile and nod and chat. We can drift into their circle, but we usually leave them confused. Why don't we drive a new BMW? You're further up the food chain, but aren't interested in moving into (pick your exclusive neighborhood).

Flash forward 10 years
This is where the fun begins. Those same people are still at the same job. They are still unhappy and don't understand why. Their lives are in shambles. That new BMW was leased, and they are onto the next car. This time they can't afford a BMW...They may have kept the house, but had to declare bankruptcy to save their sanity. They are still drowning in debt. They are aging prematurely. Their health if failing.

You have moved on to better things. Your business is thriving. You travel to exotic places. You have a close knit group of friends you can trust. Your kids are taking your life lessons to heart, and are thriving on their own. That house...you did eventually move, but not just for social reasons. You bought your dream house on the lake, or the beach house, or a cabin in the mountains. And you own it outright.

Since balance was important, you have time to enjoy life. You didn't wait until you were retired to travel and do the things you love. You are healthy and vibrant.

This is why we do the things we do.

Sorry for the delay between posts

I apologize that it has been a couple weeks since my last post. I have been busy building a website and it has been taking me longer than expected. I'll try and make time to post this week, and will be on a more regular schedule once I get the base site up and running.

I appreciate your patience.