Wealth and Wisdom

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.

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.

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

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.

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.

Note: this is a very personal post. Thank you for letting me share this with you, and for helping me with the healing process. Sometimes, writing makes everything so clear…

The call I dreaded
Last night I found out that my Grandfather died. I had been in Mexico on business, and the message my mother left was vague. By the time I called he was already buried. While I am sad, it was also a blessing for him. He had been in assisted care for years, and had spent the last month in hospice.

When I called my mother, it reopened wounds. To call my family dysfunctional would be generous. To call my mother sane would be a lie. Her “issues” have torn apart my family. Years ago I broke out of her gravity field. This topic alone is worth dozens of blog posts.

The end result is that I don’t interact with my family. I have not seen my mother for 13 years. We had not talked for three years. Since she is the dominant figure in my family, this meant I also am cut off from my dad, sisters, aunts, uncles, etc…

For years I was in a dilemma. How do I honor my parents but protect my wife and kids(yes she is that bad)? It was hard, but I started to examine the concept of honoring my parents. What did it mean? Does it mean I need to obey my parents? Does it mean I need to submit to them? No, that is not the definition of “honor.”

To honor is “to hold in high regard, to show respect to.” Honor has nothing to do with submission or obedience. My parents are not at the same place in life, they don’t understand things the same as me. In many ways, I have moved far beyond them. They raised me. They gave me food and shelter. They gave me love as they knew how. They did their best with the tools they had. For that I am grateful and I honor them. And for that I forgive them for everything else.

I also understand the role I played. I was not as mature as I am today. I felt I always had to be right, that I always had to win any conflict. I know I did not help bring things back together. I was young, I was immature, and I was as wrong as my mother. And for that, I forgive myself as well.

Life lessons
I believe life keeps throwing the same challenge at you until you solve it. For years I found myself fighting battles all too often. There always seemed to be a battle at work. Friction with a neighbor. I usually won and I moved ahead in life, but it was wearing me out. The stress was killing me.

I’ve been working on this for the last couple years. I’ve made strides, but there was still friction. Then there was the call last night to my mom. She was trying to pick a fight, and accused me of turning my back on my family. My old self would have jumped in or ignored it entirely.

Then a strange calm came over me. I was direct, honest, and assertive. I plainly told her that I disagreed. I told her that the reason it had been three years was that I was tired of being the only one trying. It was always me initiating the phone call. When I stopped calling…

When she disputed the facts, I wouldn’t fight. I calmly said that she had the right to her own opinion, and that we would agree to disagree. This was my mantra, and I held to the facts. I would not take the bait. All this while expressing my love, hurt, and disappointment.

When she could not goad me into a fight, she ended the call. Am I sad? Yes, I had hoped she would be mature enough-or love me enough-to put our relationship first.

Am I glad this call finally happened? I’m not glad my grandfather died, but I am glad my mother and I talked. It gave me the chance to tell her how I felt. It gave me the chance to stand firm without fighting. It gave me the chance to learn the lesson life was trying to teach me.

Did I honor her? Yes.

I was reading the 4-Hour Workweek by Timothy Ferriss and found this metaphor profound. The man in the red BMW is a powerful picture that inspires various reactions. A middle aged man drives up in a shiny new car. For most people it invokes pictures of success. After all, this is the pinnacle of status symbols. 80% of society buys into the lie.

You are smarter or you wouldn’t be reading this. You look at the world differently than the masses. While the rest-lemmings-run over the edge of the cliff, you carve your own path.
Look past the sun glaring off the chrome. Look closer at the man and a different picture emerges. Is that a receding hairline and a double chin? Look at the pasty skin since the only light he sees is fluorescent. The bags under his eyes are from the sleepless nights he spends worrying about the younger guy snapping at his heels. The wrinkles on his brow from worrying about the bills and creditors…and what his neighbors would think if they knew the truth. When was the last time he exercised? How close to a heart attack is he? Is that his second or third wife sitting next to him? He sure doesn’t look happy. He is caught in an endless trap. He works more to earn more so he can buy more toys to impress people he doesn’t even like.

Several years ago it hit me…I was that man. I looked at my career and found it to be empty. I had let life blow me from job to job. The major factor in each decision was job title and salary. Yes, the view was fantastic that far up the ladder. The problem was that the ladder was leaning against the wrong wall…and I was miserable!

So how do you set yourself free? You begin by soul searching. Until you know what you want in life…What are your values? What do you enjoy about your job (and past jobs)? What do you hate?

Once you have these values, you begin to design your life. Start with your short, mid, and long term goals. Make sure they cover work, family, and personal achievement. Make them challenging and inspiring. Make sure they are specific and written. Don’t worry about making mistakes, your goals will grow with you and change over time.

Eliminate people and things that do not support or uplift you. It is scary, it sounds cold, and is absolutely necessary. Until you make space you will not be able to make your dreams a reality.

An amazing thing will happen. As you eliminate people, new friends will walk into your life. As you make space, career and business opportunities will pop up.