Financial discipline

Sometimes it is difficult to stand back and watch someone make poor financial decisions.  Money can be a very sensitive topic to many people, especially if they are not doing well financially.  There is no easy way to tell someone they are messing up. These are people you care about and want to see do well.  Their mishaps are obvious to you as you look from the outside, but not so obvious to them being on the inside.  A good portion of the time these people do not have financial discipline.

First, you need to establish why you feel the need to help this person.  Most likely it is someone you care about, which makes the truth that much harder.  Second, you need to determine the right approach to present the message.  It might go something like this, “you are recklessly spending your money and need to think about your future”.  Depending on the person, he/she might not receive the message well even if your intentions are good.

Today it is too easy to get mortgages, loans, credit, etc…  It becomes harder and harder each day to maintain financial discipline with all the temptations in this world.  Cars, houses, boats, vacations, jewelry, technology, and the list goes on.  I often would like to purchase a new car, but know not having a car payment is more beneficial to my future.  I often dream of luxurious vacations, but know investing that money instead will go much further in the long run.  We must stay discipline when it comes to these temptations because they are not as important as we think.

I have come to a conclusion, that we may not be able to tell others how to live their lives, but can tell ourselves.  We can decide our own futures.  Others need to decide for themselves too.  It is hard to see others fail, but sometimes we have to let it happen.

Stock market learnings

I have only started investing into the stock market several months ago in December and have been using the Robinhood App, which has been phenomenal.  I have invested in FCAU, AMAT, VSLR, BAC, and F.  F, AMAT, and BAC have already paid me dividends, which I rolled back into my stock portfolio.  In the past couple of months, I have paid close attention to the market and paid close attention to different industries.  For example, I will pay attention to the auto industry because I have shares in Ford Chrysler Automobiles and Ford.  After getting to know the industry more and the manufacturers in each industry, you can start to see how current events impact shares.  With possible tariff increases on aluminum, we may see a drop in Ford stocks because they use aluminum framing in their trucks.

A lot of people think they are going to get into day trading and make a fortune.  This may be true for some, but not for all.  There are some people that lose a substantial amount of money and end up bankrupt.  If we take a look at how we are taxed for stock trading, we can get a better look at the whole picture.

  • 5% tax if you are in 15% or lower tax bracket (must hold shares for 1 year)
  • 15% tax if you are in 25% or higher tax bracket (must hold shares for 1 year)
  • Normal tax rate must be paid if you hold your shares for less than 1 year

The other challenge with day trading is that you need to have at least $25,000 in a margin account.  Although there is a high reward associated with day trading, there is also potential risk.  Even though day trading works out great for some, I am not willing to take these high risks in an activity I am not too familiar with.

What I have learned in the past couple of months is, buy safe stocks that pay out dividends.  Once you receive those dividends, roll them back into your stocks to help your portfolio grow.  This would be the slow, but safer way of growing your money.  If you select good stocks, then you could get a 7% to 10% return on your investment year over year.  I know this is not always the most exciting way of doing it, but the excitement will arrive after when you realize how much your investments have grown.  If you read about some of the greatest investors, then you will find that they did not take unnecessary risks.

Lastly, only invest money that you do not need anytime soon.  Once you put your money into an investment, prepare to let it sit for an extended period of time.  This will help you mentally as you endure drops in the stock market because it will most likely happen throughout your duration of owning stocks.  Sit patient and let the stock rise back up.  During all these activities are happening, you should still be getting dividends, which will help your investments grow.

The power of organization

If there is anything people say I am really good at, it is my ability to keep things organized.  When I am working, I do not want to spend time looking for misplaced items.  These items may be spreadsheets, e-mails, or reports, which are needed for a presentation.  These items may also be tools you need to complete a job in a machine shop.  Whatever the item is, if it is misplaced and you need to spend time finding it, you are simply wasting valuable time.  I think we can all agree that lack of organization can create unnecessary challenges.  So what can we do to fix this and leverage the power of organization?

Since we are all different, there is not one system that will work for all.  When organizing yourself and your work, it is important to use a system that works for you.  At the same time, you will not want to use a system so unique that it becomes impossible to transfer to someone else.  The reason I say this is because people often change roles and when you need to transition your responsibilities to someone else, a complicated system will make it that much harder.

Additionally, laziness has no place in the focus of organization.  For example, if you are using a tool and finish with it, you will want to put it back immediately.  You do not want to leave any tools laying around because they will quickly pile up and become scattered.  You will quickly realize that you are not able to find anything, which becomes an unnecessary challenge.  Similarly, you will want to file away any important documents you have.  If you allow these documents to pile up on your desktop, it will become nearly impossible to make sense of it all.  You will also not feel like organizing because it will have been a huge waste.

The power of organization allows you to get things done quickly.  It also helps you go about your work in a smarter way.  You will not feel overwhelmed from the lack of organization in your life.  You are less likely to enjoy your job when things are a mess and you cannot figure it out.  A key tool to use to improve your organizational skills is excel spreadsheets.  Spreadsheets can always help you sort out things and should be used.

What are your thoughts on organization?  Do you pay attention to it or not think about it much?

 

A good leader is…

There are many different types of leaders with different personalities, ages, and styles.  There is a young Mark Zuckerberg, older Warren Buffett, middled aged Elon Musk, and we cannot forget Richard Branson.  You do not have to be the CEO of a company to be a leader, but we often think of CEOs and presidents when we think of leadership.  No matter what role we are currently in, we should think of ourselves as leaders and behave that way.  We should also always strive to improve ourselves and everyone around us.

While sitting in a meeting this afternoon, we had our Chief Operating Officer stop by to give us a few words of wisdom.  When I was listening to him, I really felt as if I could rise to the top of the company and this made me come to a realization.  A good leader is someone who makes their team believe they have endless opportunities at the company. This does not work if the leader does not believe their team has endless opportunities.  In most cases, someone who is insincere can do more damage than good.  An authentic leader providing an honest transparent message can be very powerful and motivational.

We all want to relate to our leaders, which is why leaders need to be regular people just like everyone else.  Have you ever met a person who was in a leadership position and found out you have a lot in common with them.  You may have found out some surprising facts, which made you feel closer to him/her.  It is moments like this that make leaders memorable and make you want to do your best to help support them.  A good leader is someone who can relate with their team.

I also appreciate when a leader confides in me and really trusts me.  This allows me to respect them more and trust them.  Just like everything else, trust is a two way street.  A good leader is someone who trusts you, which allows you to trust him/her.  A good leader is not someone who micromanages you.  If your leader is working on the same stuff you are working on, then there are one too many people working on the same thing.

I try to keep these simple things in mind when I strive to be a better leader.  I know a good leader is someone who makes you believe their are endless opportunities.  A good leader is someone who you can relate with.  A good leader is someone who trusts you.  A good leader is someone who does not micromanage.  Lastly, a good leader is someone who will help you grow and move to the next couple of levels.

Competing with the rising cost of living

At the start of your career you may have student loans, rent or a mortgage, a car payment, and a bunch of other expenses.  You will want to understand the total amount of debt you have and how quickly you can pay it off (within reason).  Let’s say you have $350,000 in debt, which includes a mortgage, student loans, and your car loan.  You will probably target to pay your mortgage off in 30 years, student loans off in 10 years, and car loan off in 5 years.  Instead of breaking it down to the granular level and getting very complex, I am going to work at a high level.

Let’s say you want to pay off all of the $350,000 worth of loans within 20 years.  Each year you will need to contribute $17,500 towards principal alone.   This does not include interest or any other fees you may have to pay.  You will also need to account for other expenses such as utilities, food, transportation, and maybe even entertainment.  So challenge #1 is going to be paying $17,500 per year towards your principal consistently.  The way to do this is by building it into your budget from the start.

Challenge #2 is the rising cost of living, which is also known as inflation.  It is the general rise in price year over year.  It means the cost of services, fuel, and goods are increasing every year.  After reading an article called, What are some of the factors that contribute to a rise in inflation by Dr. Econ, I’ve learned there are two types of inflation.  Demand-pull inflation occurs when aggregate demand for goods and services in an economy rises more rapidly than an economy’s productive capacity.  Cost-push inflation occurs when prices of production process inputs increase.  Fortunately, for this exercise we do not need to fully understand the mechanism of inflation.  For this exercise, we only need to know the effect and not so much the cause.  If you have curiosity of the specifics, I encourage you to research inflation further.

To cover challenge #1, as I mentioned you need to budget from day 1.  It is better to pay more and live tighter from the beginning because you realize you can live with less liquid cash.  Tying up your cash in paying off your debt is better than using it to cultivate more debt.  The trend typically is, we make less money at a younger age and more money at an older age.  When you need the money the most in your earlier years, you will have a lower income.  When you do not need money in your older years, you will have a high income.  This is a good thing.

To cover challenge #2, you need to make sure your income is increasing and your expenses are decreasing.  You can increase your salary by gaining more experience, doing well in your job today, and planning for your future career.  You can decrease your expenses by actively tracking your expenses monthly, be willing to change service providers for a lower rate, and continuously hounding your service providers for the best deals possible.

It is a very difficult time with the middle class shrinking.  If we want to survive and move into a higher class, we need to make sure we are preparing ourselves the best we can.  We need to understand our goals and build a plan to reach them in a timely manner.

Life insurance

Life insurance can be a touchy topic for many reasons, but we should really understand whether we need it and if so, how much do we need?  A few weeks back I was talking to one of my best friends about this vary topic and it did change my perspective for the better.  Previous to this discussion, I felt it was best to get the cheapest life insurance policy available because I am healthy and do not feel that I am going anywhere anytime soon.  Instead of using the few extra dollars on life insurance, I felt I could better use this money by putting it toward investments.  Here is my friend’s perspective, which I do agree with…

“For a few extra dollars a month you are able to get a much better life insurance policy that will cover your funeral expenses, mortgage, children’s college, and then some.  You never know what will happen in the future, so you should equip yourself with the best protection possible for your family’s sake.”

A few extra dollars per month can possibly give you coverage in the $1 million range, which is astounding.  Currently, if I pay nothing my company will provide me with one year worth of salary or if I die on the job, I will get three times my salary.  Even though it sounds like a good amount, life does get expensive and it simply would just not be enough to help my family out.

Since I fly on airplanes quite often, I do not like talking about this topic because it is scary.  I would rather talk about more positive things, but life happens, or should I say death happens.  We do not live forever and we should be thinking about our loved ones.  Try not to put it off too long!

Education is important – part II

As mentioned previously, I have four strategies I use to reach success.

  • Gather information/data to better prepare ourselves for the future
  • Understand our goals and build a plan to reach them in a timely manner
  • Learn from our mistakes
  • Celebrate our successes

The last blog I wrote titled, Education is important speaks about the importance of education and the relationship it has with your salary.  Statistically the more education you have, the higher salary you will receive.  The first strategy mentioned above says gather information/data to better prepare ourselves for the future.  If you are out to get paid well and you know that higher educated people are making more money, than it only makes sense to get yourself the best education possible.

It is understood that earning a degree is not always as simple as attending school.  Effort and money are significant factors in your success.  We know everyone’s situation is different, so some people don’t need loans, some people need loans, and some people cannot get loans for school.  Assuming you are accepted to a school and you are now registered for your courses, you will need to put significant efforts towards studying and completing coursework.  This is where the second strategy comes into play, which says Understand our goals and build a plan to reach them in a timely manner.  You are well aware that you need to get into school and successfully complete all your courses to achieve the degree you desire.  You will need to build a plan that fits you best to complete everything required in a timely manner.

Throughout your years in school, you will have successes and failures, big and small.  The third strategic point reads, learn from our mistakes.  The fourth strategic point reads, celebrate our successes.  Both of these are extremely important to keep you engaged and continuously improving yourself.  As I have mentioned multiple times before, you need to learn from your mistakes as well as other people’s mistakes.  Most people talk about having a role model.  This would be someone you would look up to and try to replicate.  You should also have someone in your life you would not want to be like.  They are probably messing up quite often and not doing great things.  You may want to evaluate what they are doing wrong and do your best not to be like that.

Celebrate our successes is a big one because it helps communicate to others the good things you are doing.  It also reinforces the great things we are doing to ourselves and it allows us to know we are doing well.  Let’s say you complete a course and receive a 4.0 in that course.  This is a huge accomplishment and you should take some time to celebrate.  You can celebrate alone, with friends, with family, or with classmates.  It is completely up to you how you celebrate, but you need to recognize the great stuff you are doing.

The last piece of this I would like to mention is, it is never too late to go back to school.  It may be a bit more challenging as you get older, but many people do it.  Especially today there are online courses you can take and night classes.  It is much easier to learn today than ever before.  Even if you are not going for a full degree, there are many certifications and other programs you can partake in.  It is super exciting to know education is growing and people are pushing themselves to learn more and more.  The key is to never stop learning!

Education is important

According to sociologist William Thompson and Joseph Hickey, $35,000 to $75,000 is the income range for lower middle class and $100,000 or more is the income range for upper middle class.  Middle class is roughly $75,000 to $100,000 per household.  The average salary by education is listed as follows:

  • —High school education median salary per year is $35,256
  • —Some college education median salary per year is $38,376
  • —Associate’s degree median salary per year is $41,496
  • —Bachelor’s degree median salary per year is $59,124
  • —Master’s degree median salary per year is $69,732
  • —Professional degree median salary per year $89,960
  • —Doctorate degree median salary per year $84,396

So why is this worth mentioning?  It is important to gather information/data to better prepare ourselves for the future.  It is apparent with more education, you should earn more money, which will put you into a higher socioeconomic class.  This will allow you and your family greater opportunities to grow and succeed.  If both you and your significant other only finished high school and are only earning a combined total of $70,000 ($35,000 x 2), then you are barely on the footsteps of middle class.  If just you finished a professional degree, then you could be earning $90,000 and are in the higher range of middle class without any assistance from your significant other.

There are cost implications that school is expensive, but I would also say it is an investment in yourself.  If you can pay your way through school, earn a bachelor’s degree, and you land a job with a good company, your company may further invest in you and help pay for your master’s degree.  In my case, my employer paid 100% for my masters degree.  The agreement was after I finished school, I would stay with my employer for at least 1 year.  In addition to making more money with more education, you are becoming more valuable by learning more materials.  Completing any degree will show others you are capable of completing something.  This translates to results in the real world.

Information pulled from the following websites in 2017…
https://en.wikipedia.org/wiki/American_middle_class

https://smartasset.com/retirement/the-average-salary-by-education-level

Wheels spinning in place – part II

On April 4, 2018, I wrote a blog titled Wheels spinning in place and I would like to build on this topic because it is very important to understand why we are not covering ground as quickly as we should be.  The 4 tips I provided were as follows:

  • Establish clear objectives
  • Plan and prepare for the unthinkable
  • Work smarter, not harder
  • Communicate final results and close out

Just in the past couple of weeks I have been really applying these tips and I have really observed major improvements.  Once I pick up a new project, I am sure to establish clear objectives.  From these objectives I am able to create a plan and can prepare for potential challenges along the way.  I am very cognizant of why I am working on the project.  Does it make sense or is it a big waste of time?  If it does not make sense and will not benefit the company, then I will push back and explain why I think we should not partake in the project.  This would be a portion of working smarter and not harder.  Previously, I have picked up projects and treated them as tasks I simply had to get done.  If I did find out the project was not sensible and not value-add, it was always at the end when I completed 80% to 90% of the work.  At this point, I have used a lot of my time on a project that is not going anywhere.  Basically, I am not going to get recognition for something that is not positively contributing to the company’s financials.

Finally, you need to communicate the final results and close out the project.  This is a very important step because it helps your leadership and peers realize your value-add to the organization.  Additionally, it allows you to move onto the next project and not have to think about a project that is dangling by a thread.  Do not be a project hoarder!  Finish your projects in a timely manner and move on.  Today I focus on the large projects that will add the most value to the company instead of many smaller projects that do not add as much value.  Just because you are doing a lot does not always mean it translates into value-add.

There is no right or wrong way to achieve effectiveness as long as you are successfully achieving effectiveness.  I will say there are better methods than others.  Personally, I keep a notebook with tasks that need to get done to complete a project.  From day to day, I copy the tasks over again and again.  After you copy the task over again and again, eventually you get tired of writing it out.  This motivates you to finish the task, so you do not have to write it again.  Another tip is to focus on the most important items on your list first, especially if they are urgent.  After you complete the most important items, then you would move to the less important items.  This would be classified as prioritization.  You may have other methods that also work for you.  Just keep on pushing and continue to improve yourself.

Talent management

It does not matter if you are a doctor, teacher, lawyer, policeman, chemist, engineer, or any other profession you can think of.  You must acquire a talent to be successful in your career and it is up to you to manage that talent.  A talent is defined as natural aptitude or skill on http://www.google.com.  To build your talent, you need to invest in yourself through education, training, practice, and seeking constructive feedback.  By building your talent, you are increasing your value and increasing your opportunity to receive higher pay.  From personal experience, I have found more talent and value does not always equal higher pay.  This is where talent management comes into play.

It is as important to manage your career as it is to be good at what you do.  My first job out of college was being a chemist for a startup pharmaceutical company.  I spent three years underpaid, even though I was a very talented chemist.  It would have been near impossible to make more money with that particular company, so I decided to move on.  If your talents exceed your current role and your manager is not willing to promote you, then you need to seriously look outside.

There is also another scenario we need to be aware of where your talent is exceptional, but you are not recognized for it.  This could be partially your fault if you are not taking the right approach to communicate your abilities.  For example, when you complete a meaningful project, you should communicate it to your leadership.  This communication can come through as an e-mail, phone call, or simply setting up a meeting to review your accomplishments.  It is important to provide a background, challenges, changes, and the impacts moving forward.

Furthermore, never stop improving yourself and building your talents.  At times it can be difficult when you are not being recognized, but if you push long enough eventually it will happen.  I have gone through many dry spells where I felt nothing was coming out of my hard work and of course it is disappointing.  Although it is easy to be disappointed when results are not immediate, we must remember our short term and long term goals.  We need to keep reminding ourselves of our overall goals to keep ourselves motivated.

Household business – part II

On 04/03/18 I posted a blog titled, Household business.  I truly believe there is great importance in operating your household from a financial perspective for several reasons.  First, there is no reason to throw away your money if you do not have to.  Second, you should always try to maximize your dollar and stretch it where possible.  Third, just because you have excess money today does not mean you will have excess money tomorrow.  Here are a few key areas where we can save money in the household.

Turn off your lights when you are not using them… this does not just go for lights.  This also goes for any appliance, tool, or machine in the house that requires energy or other resource (i.e., gas, electric, water).  For example, when you are brushing your teeth you do not need to keep your sink running.  Another example, do not leave your TV on when you are not watching it.

Do your own chores… cleaning services can be very expensive.  Work into your schedule extra time to do chores in and around your house because this is an area where you can save significant money.  For example, instead of paying a landscaper to cut your lawn and take care of your property, try doing these things yourself.  Another example, is doing all of your own work around the house such as painting instead of hiring outside professionals.  This also gives you a chance to learn something new.

Keep an eye on your bills… service providers are always going to try to increase your bill at any chance they get.  Previously, I wrote a blog titled, Battle of increasing bills.  This blog speaks to this specific topic and might be worth your time to read it.  You should also keep your eye on advertisements for services you already use because if there is a deal, you can reach out to your service provider and ask them to give you the discount.  For obvious reasons, they will not just apply the discount to your account unless you ask.

Prevent your stuff from breaking… maintain your property, machines, equipment, toys, and anything else you have at home.  This also includes cars, boats, tractors, and so on.  If you can prevent your things from breaking, then you will save a ton of money by simply not having to fix them.  It is much more cost effective to take preventative maintenance measures than having to fix the items when they break.

Avoid interest, fees, and penalties… avoid at any cost spending extra money for no reason including interest, fees, and penalties.  Banks and credit card companies love when you are late on a payment because they are waiting to slap you with a $35 fee or penalty.  If you do not incur fees, you are getting the bank and credit card services for free.

There is much more to effectively running a household as a business financially, but these five are a good start.  If you have other ideas on how you could save, please feel free to leave a comment for discussion.  I would really like to see some discussion around these topics to help build knowledge and create an environment of sharing information.

Wheels spinning in place

Have you ever felt like your wheels are moving really fast, but you are simply not going anywhere?  Not too long ago, I felt this way and I felt I could not do anything about it.  The truth is, there was something I could do about it, but just did not know how.  Here are a few things I learned along the way to move projects forward and complete objectives.  I hope they are as helpful to you as they were to me.

Establish clear objectives

If you do not know where you are going, it is really easy to get lost and not reach your final destination.  You must align on clear objectives from the start of the project with your team and cross-functional partners.  Your objectives should include key milestones, success criteria, and timing.

Plan and prepare for the unthinkable

It is very difficult to plan for the unthinkable, simply because it is unthinkable.  The best you can do is plan with what you do know and try to include a contingency plan in case your original plan fails.  It is important to create a sensible plan, which makes sense for everyone and is not unreasonable.  This plan should be shared out to the team and cross-functional partners to make sure everyone is aligned.

Work smarter, not harder

This is a cliche, but works!  You do not want to take short cuts, but you also do not want to do extra work that does not support your plan to reach your objectives.  Do not mistake this as an excuse for being lazy, but use this as a way to complete your work intelligently.  You should also leverage your resources when possible to help free yourself up for other activities.

Communicate final results and close out

Lastly, you must communicate your final results and close out the project.  A project is not complete until you close it out.  If you do not close it out with a final communication, the project will stay open and may give others permission for different interpretations.  Your communication should provide background on the project, key milestones, and final results.  You may also want to include next steps if applicable.

These four parts have helped me tremendously in my career.  It is absolutely crucial to establish clear objectives and communicate final results and close out to complete a project.  It is not critical to plan and work harder, not smarter, but we must keep in mind these parts will help you become more effective in your career.