Understanding Money Gives You Choice

Money can be pretty confusing. Between 401k, roth IRAs, budgets, futures, options, interest rates, and credit scores- the acronyms and implications are mind numbing. However, the one thing we can all agree upon is that money is a useful tool (when used correctly) that can make our lives better.

MoneyAs important as money has become in our society, it is strangely absent from our school or public curriculum. Some were fortunate to have family members that understood money and were able to teach about its power. But the vast majority of Americans have never really been taught the basic principles of how money operates.

Often we default into our money habits and patterns. Rarely do we actively align our spending, savings, and overall consumption with our goals. We tend to follow our friends, facebook, family, sally mae, marketers, and bankers. My point is simple: The value in understanding money is more about understanding the priorities in our lives and figuring out what is actually important. Continue reading

Cultivating Relationships

Relationships are arguably the most important part of our lives. Along with health and safety, they make up some of the most basic needs it takes to live happily. We spend a lot of time reading about money, careers, sports, celebrities, or skills that will help us in the marketplace. And we spend a lot of time cultivating success (or attempting to) in those areas as well. But often, we discount the importance of relationships to our overall well-being. In fact, we frequently spend our time doing things that directly harm, or indirectly make it difficult to successfully manage quality relationships.

cultivating realtionshipsRelationships are interesting to study. We all have some combination of relationships that exist in our lives. They normally start with family but involve friends, coworkers, neighbors, and casual acquaintances. Although some people would argue that relationships extend to pets, celebrities, or collectible cars, we’ll limit the scope of this article to fellow humans. Intuitively, we all have a basic understanding of how relationships work. We have good ones and probably some that could use some attention. Relationships are constantly evolving and mean different things as we move through different stages of life. We must learn to cultivate relationships or they will atrophy over time. Continue reading

We Are All Getting Richer

It seems that most of what is being written about the current state of the political economy is pretty gloomy. The Rich Are Getting Richer seems to be the mantra of many on (surprisingly) both sides of the political spectrum. And statistically, the numbers don’t disagree. We also are bombarded with the ‘rising cost’ of seemingly everything even though wages are only growing slowly for some. I’m not here to debate the whole wealth and income inequality issue. I’m not really into stirring that pot and I’m pretty sure it has been stirred enough. But it is interesting to see what is often neglected and fails to make headlines or cover pieces for major media. In many ways, we are all getting richer.

we are richerAre we actually getting poorer or richer? I think we are getting richer. We live in a time of incredible security and opportunity. Technology has increased so rapidly in the past fifty years, we can’t even comprehend how fortunate we are. It is a pretty cool time in history to be alive. First world countries today are incredibly wealthy. Even second world countries have access to amenities that would have only been available to the insanely wealthy just a hundred years ago. We are really rich. We have so much, not just in material possessions, but in security, opportunity, and availability of knowledge. We even have access to incredible, delicious food year round! Continue reading

Measuring Wealth: Hours Worked To Maintain Lifestyle

How do you accurately measure wealth? That is a question I’m still trying to answer. But I’m pretty sure it is much more than dollar signs. Measuring wealth is an interesting concept. Some individuals try to measure wealth in relationships. Some countries measure it by the amount of children you are able to have and care for. Another way to measure it may be how well you are able to sleep. Hey, you can even measure it by the amount you have in a 401k. What we all know, however, is that money alone is not a full measure of wealth.

hours workedSo, why is ‘hours worked’ a better measurement than simply the amount of money in the bank? Because it encapsulates more variables. If you make $200 an hour, but you need to work 90+ hours a week to maintain your family’s lifestyle- are you ok? If you make 1m a year but your health is gone, are you really wealthy?

A Better Measurement
So, I purpose a new metric for evaluating wealth. Hours Needed to Work = Maintaining Current Lifestyle. This simple equation makes for an interesting discussion. This works across all income levels and also is useful for measuring personal progress over time. Most of us will make more money five years from now, but will we actually be making progress towards a well designed lifestyle? I think the goal of financial independence or ‘early retirement’ is to move hours worked to 0. That is the goal. Does that mean we will stop doing everything, sit on the beach all day and be lazy? Not necessarily, but it does mean we will have the freedom to do what we want, try new things, help other people, take care of our bodies, and spend time with the people who are important in our lives. I really enjoy helping people. I also enjoy fixing things. I also have a family to care for including my wife and kids. Even though I enjoy my work immensely, I still wish at times I had more flexibility to do other things with my life. Continue reading

2014 Cableless TV Setup

The television industry is in an interesting state of flux. Bundled cable subscriptions are still widely used by older individuals and, despite continually rising prices, fewer people than expected are actually ‘cutting the cord’. Younger individuals and many Millennials are simply skipping the traditional cable experience and going straight to the source for the content they want. Technology is making the entire process of finding information incredibly easy and inexpensive. The amount of material available continues to rise as do the various ways to see and consume video content. We literally have millions of hours of content available to us at a moments notice on almost evecableless tvry possible medium. Each year we have new options, products, and devices that come out. It can be tough to keep up with all of the changes. And, rarely does a product come along that can provide a better experience, save me money, and combine several ideals I’ve desired for quite some time (FireTV).

We haven’t had cable for years now, and I have tried pretty much every server, media center, and set top box in the last five years. I believe I have tried about 15 different boxes and streamers, but I’ve had difficulty finding that one that could do everything. In fact, in previous posts I’ve recommended several different options but now there is a single one that works best. Continue reading

The Simple Economist’s Guide To Cash Flow Planning

I think it would surprise most people how little time my family devotes to planning our spending. Most of our processes are currently automated and we really only discuss money during occasional unique situations. When we teach financial classes people often ask us about the specifics of how we manage our money. They want to know details about how we spend, budget, prioritize, and automate. The process seems daunting at first, but with a little bit of set-up, it almost runs on its own.

cash flowMany years ago we put together a little system and we have been using and tweaking it for years. At this point, we only spend a few minutes each month planning, talking, organizing, tracking, and thinking about our money. Almost everything is automatic. Saving, Giving, Investing, Tracking, and Planning are all done automatically. Setting up the simple system was really about thinking through three basic concepts: Prioritize, Automate, and Commit- then Repeat. That’s it. Money doesn’t have to be very complicated. We have simply chosen to organize our money so that it is in line with the important parts of our life. Continue reading

Broken Systems: Why We Continue To Fail

Failing at something is not very fun. Failing at the same thing over and over is maddening. But almost everyone I know, myself included, has a certain area of life (or more likely areas) where we constantly fail to live up to our own expectations. We tend to have great intentions, but rarely meet even our own standards. When we try to make changes in our lives we often look at the specific symptoms of our problem, yet fail to account for the broader context to the challenges we face. We like to focus on individual items, but we must understand that our lives are built around systems.

Businessman Filing InformationWe all have systems in our lives. We have a connected set of activities and routines that we perform on a daily basis. Whether we analyze it or not, we have systems for many things in our lives. How you get ready for the day is a system. There is a constant set of actions you routinely do to prepare yourself for the day. They may be quite efficient and thought out, or it may be rushed and anxiety inducing. Constantly leaving the house late and feeling stressed getting ready is likely a symptom of a failed system rather than a preferred outcome. Often, our intentions are good. We may even have a nice goal in mind. But we rarely take the time to set up full systems that put us in a position for success. Continue reading

Giving Away All My Books and Reading More

I truly enjoy reading. A great book is an awesome way for me to relax, be entertained, or learn something life changing. I enjoy reading other peoples’ work much more than I do writing my own. And I like books. Or, at the very least, I enjoy the content that they contain. One of the few problems I’ve had with books is the space they occupy. At various times in my life, the physical collection of books I’ve owned has taken up shelves upon shelves (or later boxes upon boxes) of space. I don’t really bask in the aesthetics of a large library or book store, but I enjoy having access to my favorite books at a moments notice. Traveling and moving are the times when I typically notice the volume of books that come in and out of my life.

book clutterI enjoy reading but I’m not a big fan of clutter. For some reason, books were one of the last vestibules for me to give up when relentlessly evaluating the objects I own and store at my house. So, I decided to give away almost all the physical copies of books that I own. The mental decision was much easier when I realized what I enjoyed was the content in the text and not the bound collection of paper on my shelf. There are only a few books I really want to own and that I will constantly reread. For those, I have a special place that contains just a handful of books. I’ve also been slowly purchasing digital copies of many of my favorites over the years to complete my small collection. And I have a library card. Where I live, that is a pretty incredible, often underutilized, resource. Continue reading

Get Off The Couch & Do Something: Battling Inertia

I’m Guilty. The articles that are often the hardest to write are the ones that make me look in the mirror. And I’m guilty. I’m guilty of letting inertia get the best of me. I would like to think that I’m pretty good with my time, energy, and effort- but often I find that I can get lazy. Or at least inefficient. I find that I tend to do the same things over and over. I get quite comfortable with my routines and the products and services that I use most often. I don’t even dislike change. However, the minimal amount of effort that change requires often necessitates a battle with inertia. For anyone who hasn’t thought about science since 4th grade (myself included)- Inertia can be described as resistance to any change in the state of motion. In essence, we tend to keep doing the same things over and over unless an outside force changes our direction.

lazy manAs humans, we have a tendency to gravitate towards comfort and consistency. Even if things are pretty bad, we’ll continue to do them due to laziness or fear of change. It is even worse when things are ok but could be a lot better. I tend to fall in that second category. I get complacent when things are going well but could be better. When I’m saving and spending with plenty of margin I don’t worry about change. When work is going well I don’t think about honing my skillset. When my life and marriage are good I don’t often think about better.

Inertia happens all the time in areas of our personal finance. We often continue to make inefficient decisions with our money and fail to take any action. Here are some of the more popular activities where inaction can be expensive. Continue reading

Cash is Better Than a Big Garage

I’ve got a lot of stuff. I used to have more, but I still have a lot. The people who know me best might actually find it amusing to observe my transition from avid collector (aka mild hoarder) to a vaguely defined minimalist. I actually still enjoy quality objects and I still collect several things. However, I have come to the realization that cash is still a great equalizer and much better than even the biggest garage.

full garageThe evolution of cash and the speed of the marketplace: Once upon a time trying to find objects, especially unique or inexpensive ones, was an arduous task. Trying to find a used bike that was your exact size meant calling around everyone you knew, paying a retail markup at a local bike store, or spending hours searching flea markets or garage sales. If you were in a big city you might have the luxury of finding a decent classified section. (Photo: Planetgreenrecycle) However, this has all begun to change. The concept that makes cash better than all your stored junk hinges on the speed of information. It is now possible to find what you need and purchase it quickly and efficiently. The simple combination of amazon, local retail, craigslist, and ebay can get you almost anything you need quickly and simply. You no longer need to store hundreds of items or keep things for just-in-case. Most of the time, you are better having cash and the knowledge of where to quickly get the things you need. Continue reading