Archive

Jul 22

Financial Freedom: Redefine What is Impossible

By NickNo Comments

My son is 2 years old.  It’s a fascinating time in a young person’s life.  It is amazing how much a child develops from month to month.  Just today, my son and I were at a local restaurant that had a play room which featured a large jungle gym.  We’ve been to this place before and there is a section of the jungle gym where the bars are spaced further apart than in other places.  He had not been able to climb this area by himself a couple of weeks ago.  Today, I had the feeling that he was going to be able to do it. 

I encouraged him to go to that difficult part of the jungle gym.  Although he was excited (as he always is), I could tell that he was a little intimidated.  When we take on a task in which we had met with failure in the past, we all experience intimidation and fear.  None of us like to experience setbacks and the embarrassment, sometimes external and often internal, that accompanies it.  But it is important to remember that you are never quite the same person who struggled and failed before.  You are older and wiser than you were during the last attempt.  We learn far more from our setbacks than from our victories.  Sometimes, it is just the force of sheer will to continue to attempt despite the history and despite the objections of the nay-sayers.  Thomas Edison developed the incandescent light bulb after thousands of failed attempts.  Some thought the invention was impossible.  But through the persistence and hard work, his invention brought light to millions and combined with his other innovations provided him with riches.

Thomas edison glühbirne
 
Image via Wikipedia

My son began to climb the bars and soon arrived at the same place where he had had difficulty two weeks before.  He tried to climb as he always had and was unsuccessful.  He became frustrated and asked for my help where I had helped him before, but I told him no.  I told him I think he could climb it without my help.  “You can do it! I know you can!”  I also pointed to a place that I thought he might be able to use as a foothold which would give him the leverage to push himself up.  The first time I pointed this out to him, he seemed puzzled, but he soon had his foot there; and then, with difficulty, he eventually was able to push himself up to the next rung.  Surprised and happy, he had a big smile.  He joyfully yelled out, “I did it!”.  And I, smiling the proud smile only a father can have, yelled out, “Yes you did! Good job!” 

Chuck Yeager (public domain from http://afftc....
Image via Wikipedia

Soon after World War II, the United States started to design better, faster and more powerful aircraft.  As the planes became faster, they began approaching what was then called the “sound barrier”.  Pilots approaching the sound barrier experienced shaking associated with turbulence that many feared would destroy the plane.  Some scientists were convinced that the speed of sound was the speed limit of things flying through the air.  In 1947, test pilot, Chuck Yeager, broke the sound barrier.  Soon after dozens of pilots began to break the sound barrier until it no longer was referred to as a barrier, it was simply the speed of sound.  History is filled with such moments when what was the impossible suddenly becomes possible and when those who follow can perform the same feats with ease.

My son soon climbed the bars again.  This time he was no longer frustrated.  He knew what he had to do.  The impossible was now possible for him and he would not be denied.  Watching your child succeed is probably the most fulfilling joy in the world to a parent.  I look forward to a lifetime of victories.

Your experience and the experience of your children may be that it is impossible to become financially free.  It’s not.  It doesn’t matter your background, your history, your challenges or your current income.  Greatness lies within you and within them.  Nourish your child’s belief in himself or herself.  Learn with your children so you can help them to the extent that you can. 

Remember the impossible is only impossible until someone does it.

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May 24

Asked and Answered: How are Middle Class Americans Going to Survive?

By NickNo Comments

I ran across this question on LinkedIn and felt I had to respond.

How are middle class Americans supposed to survive these economic times? With high prices on everything, health insurance, gasoline and the salaries not going up as high as they used to, it seems that for the middle class, single parents and other Americans is getting harder and harder to save. How are we supposed to overcome this period?

My response:

Your question contains within it a solution.

If you think about it, what are the things that even the strained middle class, continue to struggle to pay despite the difficulty. Why do people continue to pay for health insurance, food, gasoline, etc. Simply put, these things are valuable to everyone.

Americans live in a freer market than nearly anywhere else of the planet, which means that people spend their money on items which they find to be of value. People who struggle right now are having difficulty in showing their potential customers (including employers) that they are valuable. Every day wealth is being created. Productive energy is constantly creating wealth. This means that money and wealth are NOT dwindling resources. Our task is just to find the ways we can encourage others to share it us. This is only going to happen when we convince those that have or those who make that we are of value to them.

Too many of us walk through life focusing on what we do. We have been paid in the past by doing what we have done, so we think that by continuing to do these things, we will continue to be paid for doing them. But the world is always changing.

Consider the world of tax preparation, H&R Block and Jackson Hewitt have been hit very hard by TaxCut and TurboTax. Many people no longer see $100 to $300 of value in tax preparation. They see $0 to $25 of value in these activities due to the prevalence of cheap, easy to use software. The world is changing for all of us and what may have been valuable in the past may be of lessor or no value now and in the future.

Our task is to look inward to see how we can use our own individual strengths, experiences, resources and talents to generate value for others. By marrying that value to a business case, each of us can find personal wealth and prosperity.

 

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Nov 26

Supply, Demand and the Higher Education Bubble

By NickNo Comments

In the mid 2000’s, our society saw the largest asset bubble in modern history.  Low interest rates spurred loosening of credit which propelled home sale prices upward.  Operating by simple laws of supply and demand, the abundance of cheap and loose credit meant that there was an abundance of money.  Without a strong constraint on the availability of funds with which to buy homes, there price of homes increases to match the supply.  The crash that began in 2008 was driven in large part of the well of credit drying up.  This caused the supply of money to shrink rapidly.  Again, operating under the simple laws of supply and demand, home prices plummeted. 

For decades, we have been seeing the same process at work in education.  Driven by easy access to low interest credit in the form of Federally backed student loans, the prices of post-secondary education has risen unchecked.  According to inflationdata.com, in 1986, average costs of a 4-year degree was $10,000.  By 2015, costs of a 4-year degree is anticipated to be $120,000.   Between 1985 and 2010, the total cost of education increased more than 485 percent, while the average of all consumer prices increased about 107 percent.

Based on this information, it is apparent to me that higher education costs are a major bubble.  The only reason that bubble hadn’t burst years ago is because the Federal Government has been willing  to continue to lend with reckless abandon.  In 2010, in the wake of ever increasing student loan defaults, combined with a widespread cry for fiscal accountability in government, there finally started some discussions about limited the pool of government funds to be used for new loans.  If and when that pool dries up, finally, there will be a reversal in the cost of a college education.

Unfortunately, this will come too late for those students who will be laboring for decades under the load of loans that in many cases will not result in a large enough income stream to pay them off in a reasonable period of time.

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Oct 12

We are the Choices We Make – Where am I Living?

By NickNo Comments

Some of you know of my recent move from the big city to the middle market of Omaha, Nebraska.  Personal changes and challenges aside, I was very surprised to see how much cheaper things were.  My wife went to the grocery store and we were delighted to find that a shopping cart full of groceries which would normally cost $160 to $170 where we lived recently only cost us $116.  On top of that the sales tax was only 14 cents.  We are very excited to know we can feed our family even better than before but still increase our savings.

One of the biggest choices one makes is where one makes a life.  I recall several years ago, I was urged to move to New York where my salary would be much higher for a similar job.  However, after quickly reviewing the cost of living comparison, it was clear that although I would be making a big mistake.  When the new opportunity came to me in Omaha, analysis of the cost of living showed that I would feel better off even though I wouldn’t be making as much as I would have been in other locales.

Too often we are lured irrationally by talk of better salaries.  But wealth is not built based solely upon what we earn.  Wealth is built based upon how much of that salary is ours to keep after paying everyone else.  For if we experience a 10% salary increase, but our expenses increase 15%, we have gone net negative 5%.  This is akin to someone buying the penthouse of a 15 story building for the view only to find that his building is surrounded by 20 story buildings.  How disappointing.

It costs a great deal to living “in the city” or even in their surrounding suburbs.  Keep this in mind as you evaluate opportunities.  Know that really, prices are generally correlated with how much money is available from buyers.  When an opportunity comes your way, always evaluate the new salary relative to the median salary in that area.  If the salary is at or below the median, you may need to closely watch your expenses and sacrifice some luxuries to get ahead.  However, if you find you are making significantly above the median salary, you may be surprised how comfortable your life can become financially.

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Oct 03

Participating as a Voter is Financially Smart

By NickNo Comments
PASADENA, CA - MAY 19: A woman casts her ball...
Image by Getty Images via @daylife

Like it or not, our governments are in control of huge amounts of money, including a portion that, in theory, belongs to me.  Our leaders in our locality, state and Federal governments have leveraged themselves use of that money over a period of years.  Since the founding of the nation, there have always been people who have felt that tax rates are too high.  It seems that sentiment is only growing with time.

I don’t agree with many of the ways our government chooses to manage it’s financial affairs.  Among the ways I try to communicate that to my elected officials consists of voting.  The vote is one of the easiest and one of the most treasured political acts a citizen can make.  It requires a small investment in your time, yet our voter turnout is shockingly dismal.  It is even lower among young people.  If it is difficult to mobilize citizens to go to the polls, how can we expect to take on the more difficult work of solving the nation’s long ignored and festering problems?

Some people do not see voting as a financial issue.  But, most people do not realize that the total tax burden on individuals ranges from about 10 to 30% of income.  If you are spending 1 to 3 dollars of every 10 you earn on an item, wouldn’t you normally want to choose the one who is doing the spending?

Do the financially smart thing.  Get to the pools on November 2, 2010.

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Oct 02

Book Review: Rich Dad, Poor Dad

By NickNo Comments

For this review, I discuss another great book on financial education.  The first book Robert Kiyosaki wrote, Rich Dad, Poor Dad, presents simple, but powerful lessons on managing personal financial affairs using simple stories and easy to follow concepts.

Rich Dad Poor Dad: What the Rich Teach Their Kids About Money-That the Poor and the Middle Class Do Not!

This book does the wonderful task of explaining such dry accounting concepts of income statements and balance sheets in a very readable and understandable format.  It shows the cash flow patterns of poor people, middle class people and rich people.  It also shows how from a strictly financial standpoint that it is the middle class cash flow pattern that is the absolute worst one to have.

But more than the accounting concepts, it discusses that rich people just think differently about money, how to use it, the powers of it and virtues of it.  I have long observed that the United States is a country which craves success, but hates successful people.  Too often, I have seen people vilified whose only crime is that they worked hard and achieved success and wealth.  When I was younger, I, too, shared many of these opinions.

Granted, there are a few people, who act as leeches and make a living sucking the financial marrow out of the lives of others (pay day loan people and many sellers of financial product come to mind), but by and large, most people who have achieved wealth have done so through hard work and being of service to others.

One of the most powerful concepts is the fact that you will only earn so much by working for a paycheck.  It is possible to get rich working for others if you start early and manage your cash flow well.  However, if you open your own business on the side, the potential for reward is much higher as a business owner.  In addition, as an employee, you serve the employer in a designed role.  This means that, most likely, the role was not designed specifically for you and consequently, wasn’t designed to take advantage of your unique gifts and talents.  It is only when you have the opportunity to craft a role just for you, will you have the best opportunity for success.  Finally, when you work for a paycheck instead of profit and you can count on a safe and steady stream of income, you often subconsciously turn off part of your creative centers of your brain.  When your financial well-being is tied to generating new ideas, you will be surprised how much more you can dream up and give life to.  Unless you are trained to look for opportunities, you will pass them by.

The most vital learning to gain from this book is a realization that the employee mindset is a limiting one. The employee as is largely understood today is a relic from the industrial era and the factory culture.  Prior to the industrial era, money was generally earned by farmers and tradespeople buying and selling the fruits of their labor.  In effect, everyone was self-employed.  In the 1800’s and much of the 1900’s, roles were designed for people to act as cogs in the manufacturing process.  Tasks were developed by managers into established procedures and the last thing the managers wanted was for an employee to use their brains to redesign the system or dream up ways to change things.  In exchange for doing things exactly the way the managers told you to do them, the employee was paid a wage.  The belief in the infallibility of management decision making has thankfully gone away in most workplaces, modern management thinking is moving much more in the employee designed workplace that is paid based on performance and production.  But the factory/employee mindset is still alive and well.  It is very dangerous to have in economic climate of the 2000’s.  To remain competitive in a global economy, you need to be able to leverage the talents and creativity of your people and the employee mindset is a real obstacle businesses need to overcome.

By rejecting the employee mindset and adopting a self-employed mindset (even if you are an employee) you are not only going to distinguish yourself to your employer, you are also going to continue to exercise and grow your creative muscles and your ability to identify and capitalize on opportunities.

Rich Dad, Poor Dad is a great book that brings you several great lessons.

If I have inspired you to pick up Rich Dad, Poor Dad, I encourage you to click on the links in this post or on my page.  YouthFinancialEducation.com is not only a great place to learn how to succeed financially, it is also a place that I am constantly leveraging my creativity and skills to bring you value.  By clicking on links from here, you help reward me for bringing that value to you.

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