Month: March 2015

Clearer Choices

Did you know that some of the most financially successful people like to dress the same way every day at work? They have a dozen or so of the same outfit just so they don’t have to make choices on what to wear early in the day. They reserve their decision making to the more important decisions of the day.

Have you tried to order something and you’re just overwhelmed by the plethora of colors, hues, textures, sizes, price and other factors that you ended up not buying at all?  I guess I’m not the only one.

Do you have cable TV? Did you notice there are hundreds of channels yet nothing worth watching most of the time? You end up with half a dozen or so favorite channels and ignore the rest.

How do we simplify our lives to have clearer choices?

If I have to have to make a decision about purchasing something major (my wife jokes that anything over a dollar is major to me), I sometimes bring out a spreadsheet and calculate which decision is most efficient and effective at the same time. I make sure that my desire is still accomplished but they have to go through a complex algorithm of yes and no answers.

I also like to do mind maps sometime. I don’t use software to do mind maps but a pencil and paper. Sometimes a super thin writing inkpen. I try to consider all the factors and make my decision from there.

If faced with so many choices, I usually pick the best three. Then from there I write the pros and cons of each, plus any cost involved in each choice. After looking at it several times, I finally make a decision.

I find that by doing enough research and sound decision making, I seldom make the wrong choice. That’s very liberating. It eliminates waste or any obstacles to forward progress. I can do more because I don’t have mistakes to fix.

One way to make clearer choices is to eliminate the unnecessary. Do you have too many peach colored shirts? Give some or sell a few of them. Do you have too much of something? Somebody else somewhere could use it – there’s no sense hoarding it “just in case”. By living with less, you already simplified your choices.

Another tactic is to buy only the items that you really really like. If you like a certain shirt, I’m sure you will always wear it. If you buy an unfamiliar color “just to be different”, it will be probably end up languishing in  your closet. Pick the best choice and you’ll savor it more.

One last tip: Try to remember what worked for you in the past and don’t deviate. For example, I told myself never to buy a four door truck again because the truck bed area is seldom used and it is very ungainly to drive. I get tempted a few times a year but I always go back to my lessons learned.

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Is It Good Enough?

It is a running joke in my family about my uber-analytical way of decision making. For example, I wanted to buy a second car for us but it I am on my third year of research and is not complete yet. Isn’t that lame?

Well, assuming that maintaining a new car costs about 6,000 a year (this is based on one of the cheapest subcompacts brand new car that is bank financed), I’ve been saving thousands of money over the years.

The only disadvantage is the inconvenience (maybe once a month) it poses to us having only one car. We find ways to circumvent it and the savings is way much worth than the minor inconvenience.

Let’s go back to my snail-paced decision making. One time I was trying to decide what to do with my “heavy” bicycle. Here’s the dilemma: Should I buy a new bicycle and sell my old one? Or change parts in the bicycle to make it close enough to the features of the new one?

To the spreadsheet I go. I tracked every single part and how much it cost, how much the bicycle cost, how much time I will spend on buying a new one or having the old one upgraded with new parts. It took several hours of painstaking research, but after that I was already armed with enough knowledge to make a sound decision.

There’s a negative side to this. Sometimes it would takes months (years) to make a decision on something. It’s good if the decision is a major purchase of material things but bad if the decision is something that needs to be made now.

When is a good time to make a good decision then?

It is always prudent to do due diligence first. Don’t just dive into something without knowing about it. My rich mentor said that if I wanted to go into the house renovation business, I should spend hours in Home Depot (which happened to be one of my top three favorite hang outs) and look and study the household hardware and doodads on display there.

It is also wise to map out something so that you have an expected outcome in the end. In real estate investing, a “proforma report” is done prior to purchasing an income property. In that report, there is a “fair”, “good” and “excellent” profit assessments. From that report you may also be able to assess what will be your exit strategy in case things go sour.

Over-analysis may lead to indecision. There are things we do that even if there are still unwanted imperfections, we have to go on otherwise we will be stuck in the treadmill of wasted efforts. As an example, back in my old navy days, when we type on Optical Character Recognition (OCR) forms, we were only allowed three mistakes. We took advantage of that imperfection allowance even though we feel that every document should be perfect. Time was not wasted, documents moved through.

When we have guests coming over, don’t we clean up and organize everything in our homes so that they would feel welcome and wanted? Sometimes we tend to go overboard (as in using a toothbrush to clean out the grout lines in the kitchen counter?) and that’s fine. But we can’t be cleaning forever. We have to accept some things as being “good enough”.

Through experience, we will be able to ascertain which things are ready for presentation without further delay. If we lack experience, we can ask a mentor or even an observer for an honest opinion on where we stand in the process. As we get older, we become wiser on which things will be “good enough”. We have to be efficient and effective at the same time.

Did I buy a new bicycle? I kept the 15 year old bicycle and replaced a few critical parts. It made it lighter and more efficient without costing hundreds of dollars more.

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Sharing Our Gifts

There is a Proverbs verse that states “There is that maketh himself rich, yet hath nothing: there is that maketh himself poor, yet hath great riches”.

The first group of people identified in the verse are those that surround themselves with materials to impress others, for instant gratification or just to feel good about themselves. They tied their personal satisfaction to the perceived value of their possessions.

Yet by doing so their financial health has suffered. Materials come at a cost and their savings were depleted — their debt accumulated a very fast rate. Some of them act generous but only because it assuage their guilty feelings or it made them look impressive to others. But is this the right way to live?

A big resounding NO! If you noticed, there’s no political correctness in this blog site.

That’s enough negativity already. Let’s take on the positive group.

The other group are the group that like to keep a low profile. I think you have heard of people that look pretty simple from the outside yet are incredibly wealthy on the inside. I could name several of these guys because I come across a few of them every week.

One of the extreme stories I heard was a man who was a billionaire. He lived on a rented house, does not own a car yet thousands of people benefited from his charities.

One might presume that these rich folks don’t have fun and live miserably. Au contraire! Since their happiness is not decided by material things, they are happier and enjoy meaningful close relationships. Some of them don’t even let their children know how much are they worth. But they send their children to some of the best colleges, sometimes with the children footing most of the bill for their own education.

One little secret is that this second group are also very charitable. They share what they have. Their friends and acquaintances don’t even know of their altruistic endeavors. In sharing, they keep on getting more. Their main reason in sharing is not to get more – but to ensure that their fellow human being in destitute times are taken care of.

I have known a few people who are very generous, one of them is my wife. By generous, I mean they don’t necessarily give money but also their time and talent to help others improve their lives, either at work or in their personal lives.

I have seen a few children that at a young age were generous and caring. If you know of one, keep on nurturing that character. We could all benefit from his or her example, and hopefully would inspire others to emulate them.

Before I forget, all of things we have – including our talents – are just gifts from our Creator. Gifts tend to multiply when shared…

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At A Turtle’s Pace

I know you’ve heard the story about the Hare and the Tortoise. They went on a race and the Hare thinking that he’s fast enough to beat the Tortoise decided to dilly dally and get distracted along the way. In the meantime, the Tortoise continued on at a slow but steady pace. The Tortoise ended up winning.

Let’s apply this to money. I often read about prolific earners whose income are in the  tens of thousands of dollars a month (between forty to seventy), and I was thinking if I had that income, I’ll only need to work one month per year.

But let’s closely examine this. I realized that the amount was gross income. When I started deducting the taxes withheld or allocated for federal and state, sales taxes (when applicable), cost of goods or services, and debt service (for some), the funds started looking quite attainable by a highly paid executive.

Then we add the daily expenses, and the purchase of expensive equipments (camera, smartphones, computer, printers, videocamera, electronic gewgaws, vehicle), and now it’s looking that a regular employee is just a few thousands less on the income level.

This goes to show that we can be wealthy even if we are regular employees. There’s a few published stories of persons who worked a regular job for a few decades and when they reached retirement age, they were millionaires. How did they get there? By savings and prudent investing.

I bet that for every one of these highly successful regular employees, there are two or three other that attained financial independence and their life story will never be known to the public. Why is that? Because a majority of people would rather keep a low profile in order not to attract more taxes or unwanted solicitors.

A few of these published millionaires became wealthy by buying real estate and renting them out. Some have small businesses and some invested in stocks, bonds or mutual funds. They don’t drive ostentatious luxury cars and they dress simply. Frugality is part of their character.

It’s not that they didn’t enjoy their lives. In fact, they have spent and enjoyed more family time than the average big corporation executives. They savor their time with friends and family as reward for their hard work. They don’t push to get more riches because they spend less than the average person, therefore their income keep on increasing.

So the tale about the Tortoise or Turtle is very much applicable to our financial lives! You and me can become wealthy by ever so slowly and steadily limiting our expenses, at the same time increasing (slowly) our savings and investments.

Let’s start it today!

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