Thursday, April 21, 2011

Saying Yes: The Lesson I Learned When Falling From 10,000 Feet

For those of you who know me well, I think you could attest to the fact that I am a pretty conservative guy. I suppose you could also say that participating in extreme sports is pretty out of character for me. In fact, growing up in Nebraska, I was one of the few boys in my neighborhood that did not play football (not that football is an extreme sport). Part of my lack of participation stemmed from my Mother’s fear of my injury and the other was that I was a lanky and awkward pre-teen.

So two weeks ago when a close friend asked me to go jump out of a plane to celebrate his birthday my default response would have normally been to tell him to go take a hike. But for some reason, this time I said yes.

Now don’t get me wrong, I immediately wanted to back out, I was scared. Being the realist that I am, I was instantly thinking about all the possible ways that jumping out of an airplane with a glorified backpack strapped to my body could go wrong – if there was a terrible outcome, I thought of it. But for some reason I still showed up for the two hour car ride to the air strip.

To make a very long story short, when we were cruising at 10,000 feet and the door of the airplane opened I realized that if I had simply said no I wouldn’t be jumping out of a plane with hopes of my parachute opening. Even during the first three seconds of free fall I was seriously questioning my judgment of the whole scenario.

But then it happened...

After a few seconds of sheer terror when I let myself fall from the security of the airplane; I entered into one of the most breath-taking and memorable experiences of my life. Words cannot describe what 45 seconds of free-fall feels like. There are probably only a few things that are as insane and as memorable as falling with no restraint at 120 miles per hour. And that is when I realized that I would not have experienced all of this if I hadn’t said Yes.

I am sure a few of you are curious where my skydiving story fits into personal finance.

SkydivingOften I force myself to slow down and see the “forest through the trees”. It is so easy to get stymied in the day to day requirements of starting a business and even just every day life! I have to remind myself to remember the big picture and enjoy the ride.

Accumulating and preserving wealth is the same way. Saving and living within your means is not accomplished with a short burst of effort, it’s accomplished over a lifetime. It’s easy to get bogged down while you are diligently stashing away your hard earned dollars for the future. If you aren’t careful it is easy to slip into scrooge mode and become a hoarder that no one wants to hang out with. And that is why you have to enjoy the ride.

We all need to say Yes to opportunities along the way!

Saying yes for some of you might be as simple as allowing yourself to occasionally take the family out to eat instead of cooking at home. For others it’s going on a family vacation or upgrading the home television. Saying yes will be different for all of us but the point is to allow yourself to do it.

If I had not said yes to jumping out of a plane I would have missed out on a great story and a memory that will last a life time. Make sure that you are not missing out on great stories and memories – Say Yes to opportunities!

Thursday, April 14, 2011

Bask in the Glory of Success

It’s really pretty simple when you think about it… we have limited resources and an unlimited number of spending opportunities. When it all comes down to it we are forced to make those tough decisions because we have a natural budget (assuming you are not racking up credit card debt) – we just don’t have enough money!

I have been thinking a lot about climbing the tall mountain of financial independence lately. It sometimes seems like a lonely, narrow road with no end in sight. So I wanted to give you some encouragement today. We often get bogged down in the day to day of trying to pay down debt, save, and plan for the future.

To be honest guys, I even start to feel burnt out after a while.

So how can you avoid burn out? After all it’s a long-term game! So here it is, the five steps to avoid burn out…

I call it the Success Cycle:

Success Cycle

It’s all about setting a goal, achieving it, and rewarding yourself. Let’s do an example.

Annie has a goal of saving $10,000 for a down payment on her first house. She has been doing a great job of climbing the tall mountain, so she has an emergency fund, no credit card debt, and is living on a budget.

Let’s be honest guys, if Annie wasn’t doing the three basic steps above could we really even begin to think that she would be able to save $10,000? No Way! Without those three steps Annie can’t have this goal. So for some of you out there your first short term goal might be one of those steps.

So Annie determines that she wants to save this money, how does she know what a reasonable time frame is? She doesn’t want to be too aggressive, otherwise she might give up in the middle. She also doesn’t want to be too laid back or she will feel like the goal is not worth it.

My rule of thumb is: Any short term goal should be accomplished in 18 months or less.

Annie should examine her budget and use the 18 month rule to set a timeframe. Let’s say she decides to save $10,000 in the next 12 months. The next step is to determine what her reward is. Let me just put it this way – it has to be worth it. If you saved 10 grand and your reward was an ice cream cone, would that be very satisfying? No way! You know yourself, you know what will make you feel like it is worth it; so set a reward that will accomplish that!

The last step is to bask in the glory of your reward and success. Live it up! You really need to enjoy your reward and take a break from the intensity. Then after you are recharged – do it again.

This might seem basic… that’s because it it! The success cycle is just like anything in personal finance, it’s not rocket science! You can do it and this method is proven to help keep you from getting burnt out.

Monday, April 11, 2011

Kids and Money

I will occasionally repost articles that I found interesting, thought provoking, or entertaining. Ronny and I have been talking with each other a lot lately about kids and money. When this article was published last week it seemed very timely to me, so I thought I would share it:

7 Things You Should Never Say to Your Kids About Money

By Laura Rowley on Yahoo Finance

Two-thirds of parents think they could be doing more to teach their children about money, according to a new survey of 1,000 parents by T. Rowe Price. Only 28 percent of respondents say they are very prepared to discuss financial principles with their kids, such as setting goals, the importance of saving, smart spending, inflation, and diversification. Part of the problem is parents are foggy on some of those concepts: On average, they grade themselves a "B" for their knowledge about money, with more than one-quarter grading themselves a C or lower, the survey found.

I initially thought I would write a column about how to raise money-savvy kids. But that information is ubiquitous (see your local library). What struck me as more important is to know what you should never say to your kids about money. What words and attitudes can turn kids into spendthrifts or hoarders, under-earners or workaholics, financial basket cases who may eventually spend thousands of dollars in therapy sorting through their issues?

So I consulted a few money therapists. Here are seven ways to avoid raising financially dysfunctional kids:

#1: Never make money the unmentionable taboo in your house.

"The worse thing we can say about money to our children is to say nothing at all," says Brad Klontz, financial psychologist and co-author of "Mind Over Money: Overcoming the Money Disorders That Threaten Our Financial Health." Not speaking about money matters conveys the message that it's either an unworthy or taboo topic. "If you do not teach them about money, who will?" says Klontz.

#2: Conversely, never talk incessantly about money.

I recently received an email from a mother of an eight- and 10-year-old, who wrote that she and her husband began discussing money with their kids at age two: "They go with us to the bank, watch us pay our bills, balance the checkbook, etc. My husband has even used our wipe board to explain the process of how money is earned by mom and dad, how it gets to the bank via our paychecks and how it is spent and saved. We tell them everything and I am amazed how despite all of our efforts we still get, especially from the oldest one, 'just use the card.'"

I asked California psychotherapist Kate Levinson, author of the new book "Emotional Currency: A Woman's Guide to Building a Healthy Relationship with Money," to weigh in on the email. "It's really easy with money to be too lax or too obsessed with it — educating too much," she says. "Depending on the kid, if we push too hard, there's a boomerang effect, and kids can respond in the opposite way." Whatever educational strategies you employ, pay attention to how your kids are reacting, Levinson notes.

#3: Never say 'Let's shop until we drop!' to kids without suggesting some parameters.

Money therapist Karen McCall, author of "Financial Recovery: Developing a Healthy Relationship with Money," due out in May, says a fun day at the mall can be disastrous if kids have no idea what the limits are. "Parents can build up anticipation that turns shopping into a negative experience," she says. "The kid learns, 'I can't get my hopes up; he said he was going to buy me a toy, but I can't buy the one I want.' Instead, say, 'we're going to the store and we have $X to spend on your dress or your toy.' Now they have guidelines." Suggest to older kids that they can supplement that budget with their own savings if they'd like a wider selection.

#4 Never make 'we can't afford it' the only response to kids' financial requests.

That statement is a timeless justification that few children could argue with. But in fact, you could probably afford most of what your kids want if you were willing to go to extremes — like cash out your retirement funds, max out your credit cards or sell your house. It might be more productive instead to explain to your children why you choose to spend money the way you do. If you're not careful, you may set them up for a life of obsessive work in pursuit of getting what they felt has always been out of reach. "Or they could decide that since it is out of their reach, why bother trying to get ahead?" says Klontz.

#5: Never turn a child's small mistakes into heavy-handed teachable moments.

I received another email describing a father who wanted to teach his five-year-old not to waste money. On one occasion the child asked his mother to buy him a slice of pizza and then didn't eat it. When the father came home from work, the child mentioned the incident in a lighthearted way. The father took out a dollar and told his son to give it to his mother for wasting her money. The child put his head down and handed her the dollar.

"Be careful not to make a Supreme Court case out of what we perceive as kids' carelessness or lack of respect for something," says Levinson. "A kid's hand slips and the balloon goes up in the air; or maybe he doesn't like the pizza. I don't think these are best places to teach value of dollar. You run the risk of teaching them that what they want doesn't matter. We are better off if we can at least some of the time say, 'I don't like that pizza, I don't want to eat it' — and have it be okay."

#6: Never lay a financial guilt trip on a kid.

Levinson's book profiles a woman named Susan whose parents told her they were taking her out of private school in sixth grade because she was too proud and entitled. In her freshman year of college, Susan's mother found out Susan had tried alcohol, and sent her a letter cutting off support. Susan put herself through college and graduate school, but never saved any money. "I think this was a form of perpetuating my mother's punishment of me," Susan said. Thirty years later, Susan's father confessed they really couldn't afford the private school or college tuition.

Susan's story is extreme, but I've interviewed other adults who feel guilty spending money on themselves, based on childhood experiences. "Kids cost a lot of money, and costs escalate with their needs and desires," says Levinson. "I think it's easy for us parents to lay guilt trips. Some kids get consistent messages from parents that if they weren't spending the money on school or music lessons they'd be flying to Paris or have something that they need. Eventually the kids feel bad or guilty for wanting things in the world."

#7: Never make your child a financial confidant.

In his current research, Klontz has found a "significant percentage" of the population feels better after discussing their financial stress with kids. But that's a big no-no: "Don't use your child as a financial therapist," he says. Children need to know the adults are in control and taking care of things. They're not capable of helping with the big issues, like looming credit card debt or an underwater mortgage. If you lose your job, be honest about the situation and empower kids to be part of the solution. "Have them plan meals, shop for them and cut coupons," Klontz says.

McCall agrees: "Use all resources — time, energy and money — to meet a child's needs. Explain they can't get the new bike or go on the ski trip, but make sure a kid's emotional needs are being met. Go outside and shoot hoops, read a book together. Kids need connection and a feeling of safety and security — they don't need things."

Friday, April 1, 2011

Pod Cast #4: 10 Ways to Win the Lottery… April Fools!


Jim Collison and Andrew Hunt are together again for the April Fools edition of the Financial Tech Podcast.  In a jam packed podcast, we cover some tips and tricks to winning the lottery without ever playing it!  This could be the best 30 minutes of your day.

“I think we have all heard it said before: “Once I win the lottery, then I can do…”
Wouldn’t that be great!? Winning the lottery – wow that would be cool.
·         The odds of winning the Powerball: 76,275,360 to 1.
·         The odds of getting struck by lightning once in a life time: 3,000 to 1
·         The odds of getting struck by lightning twice: 9,000,000 to 1
WHAT!? You are more likely to get hit by lightning twice than winning the Powerball!

So let’s say that you do win the lottery…
Researchers at Kentucky, Vanderbilt and Pittsburgh studied the Florida lottery.
They found the 5.5% filed for bankruptcy within 5 years of winning. Large winners were just as likely to file as small winners!

Money does not change who you are… it simply magnifies your relationship to money!

So what are the take-a-ways?
1. Pay yourself first
2. Have a goal of saving 16.6% of your salary each year
3. Playing the lottery is a waste of time, money, and emotion – Create your own lottery!
4. Achieve your dreams by making it automatic.

On a lighter note… Andrew is a big fan of April Fool’s Day, so here is what he did to Ronny at the office this morning.

2011-03-31 April Fools

2011-04-01 April Fools


Happy April Fool’s – Now go out and have some fun!