Saturday, February 17, 2018

Finding Internal Measures of Personal Finance Success

Recently, in the midst of an exchange with someone who was considering some major life changes, I wrote the following almost-completely-off-the-cuff comment that I wanted to share here:

“Feeling “average” comes from using external measures to judge the quality of your life and not internal ones. Guiding my life by internal metrics rather than external ones has literally been the best thing that’s ever happened to me in terms of how I feel about myself and my place in the world. What’s important to ME? How do I build THAT and be better at whatever THAT is? Am I better at whatever THAT is than I was a year ago or five years ago? The amount of money you make is determined very, very much by factors outside of your control, so basing your personal value on your net worth or income isn’t going to bring happiness.”

This launched a completely different route in the conversation and led to a bunch of useful and interesting observations that I’ve been reflecting on deeply for the last several days.

External Measures of Success

I think that the biggest reason that the first several years of my professional life were troubled (to say the least) was that I subscribed to external measures of success for the first time in my life. Let me explain.

When I was young, most of my measures of success were internal ones – in fact, almost all of them were. Did I feel like I was a good person who lived up to my values (or the ones I was learning from Mom and Dad)? Was I learning something new? Was I treating other people in the way I would like to be treated?

My own internal sense of how well I was doing those things steered my own sense of worth and success. For the most part, those things steered my external measures of success, too. I had a healthy number of friends, especially for someone who was (and still is) pretty introverted. I got good grades in school. You get the idea.

Over time, though, I slowly began to put more and more value on external measures of success. I remember that transition starting in high school, when I began to care more about the grades than about learning the subject. It began to really take off in my college years, when I began to worry about inherently pleasing others with my actions. Rather than doing the right thing because it was inherently the right thing, I’d often try to do it because I knew it would please or impress someone else, and their reaction to what I was doing would tell me how worthwhile my choice was.

By the time I reached my early professional years, I was almost entirely subscribed to external measures of success.

My “success” was judged by the clothes I wore and the vehicle I drove and the gadgets I owned and how casually I paid for things and how fat my wallet was at the moment. The last real internal measure of success I held onto was some of the creative work I did in my career, and over time, even that slipped away as I constantly strove for numbers that would impress others.

I judged my worth by how many people applauded my talks and how many people gave me public kudos. I judged the value of my output entirely by how many people read it or used it.

It was no longer about what I thought was good or right, but what I believed other people thought was good or right.

Where did that leave me? It left me on the precipice of financial ruin, as I had spent tons of money chasing the idea that people would respect and value me if I just had this thing or that thing. At the same time, it left me with a social circle full of people that honestly didn’t care that much about me – I really only have one or two friends from that era of my life.

I was constantly spending money and time and energy chasing some kind of external validation that was never, ever going to come. There were never going to be enough people applauding. There were never going to be enough oohs and ahhs at my latest gadget. There were never going to be enough looks of appreciation at my wardrobe.

Why? External validation and external measures of success go away at the blink of an eye, and you’re left with just you. If my sense of success comes from the applause of a crowd, what am I left with when I’m all alone? If my sense of worth is based on others ogling my watch or visiting my website, what am I left with when I’m sitting alone on a hill somewhere?

The truth is, I’m not left with much at all.

Internal Measures of Success

The solution, I’ve found, is to live life by internal measures of success. It is only through doing this as much as possible that I’ve found good personal, professional, and financial results.

This might seem like a strange solution, particularly on a website that talks about personal finance. After all, isn’t a person’s net worth a pure measure of their external success, that they’ve made enough external choices to accumulate wealth?

Bear with me for a little bit, though. We’ll get around to answering that question.

An internal measure of success starts with one simple thing: what matters to me? In the absence of anything else in the world, what matters the most to me?

My first inkling of a new direction regarding that question came from having a child. The experience of holding an infant in my arms and realizing that Sarah and I were fully responsible for the care of this helpless little guy and ensuring that he grew up to be a functional member of society and able to care for himself on his own knocked me for a loop.

What I came to realize over the next few months is that raising this child to the absolute best of my ability was something that I wanted more than anything. My boss didn’t want it, and I didn’t really care that he didn’t. My social circle didn’t want it, and I didn’t really care that they didn’t, either. Being the best possible parent I could be mattered to me, and it mattered whether there were 500 people applauding or no one applauding. It mattered whether all of my friends were on board, or none of them were.

Being the best possible parent I could be for this child mattered to me. It didn’t even really matter that much how my child turned out (because I understood that nature and nurture both play a role in the process), but that I did everything in my power to be the best possible parent by my own internal sense of what a good parent is. If I succeeded at that, then I didn’t care what other people thought. I also didn’t really care that much about the exact nature of my child’s life in adulthood – even if he didn’t have the perfect life in adulthood, I would still know I did my absolute best to guide him there, and I couldn’t ask myself for more than that.

My sense of whether I am succeeding as a parent doesn’t come from whether my children express love for me or whether they get good grades in school. It comes from whether or not I’m listening to them when they speak or whether I am there for them when they need me, or whether I am striving always to find meaningful ways to nudge them toward good, sound internal principles for them to live by. Am I doing those things with my whole heart? If I am, then I’m succeeding as a parent, no matter the outcome.

Of course, part of that success comes from having the time and resources to be the best possible parent I can be. Am I providing them with quality nutrition? With shelter and safety and security? Am I able to be present in their lives without distraction and with minimal stress on my shoulders? Do I ever have to doubt whether or not I can provide those kinds of support?

Thus, in a secondary but quite important way, a certain level of financial success plays strongly into being the best parent I can possibly be. A certain level of financial success enables me to provide the core things they need without any question. It enables me to be present in their lives with a minimal level of stress and worry, and that enables me to give them focus and attention and thought and care when they need it.

So, let’s roll forward a few years. Let’s assume that I’ve spent those intervening years doing everything I can to be a good parent. I’ve done everything I can to provide shelter for them and care for them with as little stress as possible. I’ve made good financial choices so that they can have those things without much question.

Then, suddenly, calamity strikes. My net worth is wiped out. What now?

If I judged my success by that external measure – net worth – then I would feel like a failure. I had failed my children. I had failed myself. I had failed at life.

On the other hand, if I rely on my internal measures of success – have I done everything I can do to be a good parent? – then I’ve still succeeded. An unexpected event may have flattened my net worth, but that doesn’t change the fact that I have spent those years being a good parent, giving them my attention when needed, imparting principles into their life, providing shelter and nutrition and care. That doesn’t go away just because an external metric collapses.

Internal Versus External

There are three big ways that I like to use to describe the difference between an internal metric of success and an external one.

First, is this something that I care about myself with no input from others, or is this something that is heavily connected to what I think others care about? For example, I genuinely care about being the best possible parent for my children, not because of what the neighbors think, but because I want my children to have a good life on their own terms guided by solid principles where they have the tools they need to find joy and navigate through their inevitable missteps. That’s what I care about, thus it is an internal metric. It is entirely centered around my own values and principles, not trying to match what I think the values and principles of others are.

Second, am I judging success by the process – the steps that I’m taking along the way – or by the end result? Often, the end result of a long process is something that functions as an external measure of success. “I climbed Mount Everest!” looks amazing and is a good external measure. However, if you ask any mountain climber what tells them whether they’ve succeeded at their passion of mountain climbing, they’re likely to tell you about the day-in-and-day-out process of training that made a climb of Everest not only possible, but a reasonable outcome of their training. A huge success is amazing, but the true internal measure of it is whether or not you’re truly working toward it, day in and day out.

Third, could an unexpected external event definitely harm my sense of success? It is much, much harder for an external event to wipe out a sense of internal success. For example, an unexpected event could gobble up tens of thousands of dollars tomorrow, but that wouldn’t change the fact that I am a success at being a wise steward of my money. I just wouldn’t be a person with a high net worth. My external measure of success might not look good, but my internal one still does.

A measure of success that’s oriented around something that you care about without the input of others, that’s focused on the consistent process of getting there, and can’t really be derailed by a big unexpected event is an internal metric of success.

Finding Internal Measures of Success for Finances

So, how does all of this translate to finances?

Finances are a tricky thing to tie internal success to. After all, there’s almost nothing more obvious as an external measure of success than a person’s net worth, right?

However, if you look at your financial state as the outcome of a lot of wise choices and you also look at it as a foundation for almost everything else you want to do, then it’s much easier to make it an internal measure of success.

I want to be financially successful, not so that I have a big fat bank account, but so that I can give my daughter my full attention with minimal worry and stress hanging over my head, so that I can provide my son with the shelter and nutrition and care that he needs to grow well, so that I have the free time and space to reach my other son and help him build some strong internal principles. Financial success helps me find the space to do those things and many other similar things. While financial success can seem like a big external measure of success, it can also be seen as a strong foundational internal measure of success.

So, how does one measure it?

The approach I find most powerful is simply being mindful of my individual financial moves. If a dollar leaves my possession, I want it to be used in a wise way that brings some sort of genuine meaning into my life or provides a real foundational support for the things I care about.

I can do this whenever I please by simply reviewing all of my recent purchases. For example, I might pull out all of the receipts from a day that included shopping and paying bills and simply ask myself:

Did I spend every dollar wisely today?

I can ask myself that question at the end of virtually any day. It’s a guard against meaningless spending, and the more often I can answer that question with a strong yes, the more I inflate that internal measure of financial success.

People sometimes balk at a question like that because it seems to imply that incidental purchases and expenses are strictly a bad thing. I disagree. I have a line item in my budget that’s purely for incidental expenses, giving me the freedom to be spontaneous. A dollar spent out of that pool is wisely spent; it’s only when I start going out of that pool that it starts to become unwise.

If you dig into that question a little bit, you find that it nudges you toward being smart with your spending and really shopping around for the best value for your dollar. Paying your monthly cellular bill is probably a wise move, but isn’t it even more sensible to see if there isn’t a better cellular option out there for you, whether through your current provider or a new one? The same is true for all of your bills, from insurance to household supplies.

Of course, that question about the wisdom of each dollar is smartly paired with another one:

Am I wisely putting the rest of my dollars in a place where they can be used wisely tomorrow?

If you follow the first question closely enough, it’s likely that you’re spending less than you earn. If that’s true, then what are you doing with the leftover earnings you’re not spending? Ideally, you’re putting those earnings aside for the future.

Are you doing that wisely? Are you using your extra dollars to shore up an emergency fund? To pay off high interest debt? To save for retirement?

Just letting the extra dollars sit around until you can spend them on a big splurge rather undermines the decision to be wise with your spending. Doing something wise with those extra dollars now so that you can make wise choices with them later is a much better route to follow, one that helps support all of your internal measures of success over the long haul.

Just keep asking yourself those two questions:

Did I spend every dollar wisely today?


Am I wisely putting the rest of my dollars in a place where they can be used wisely tomorrow?

If you do those things day in and day out, week in and week out, month in and month out, and you really pay attention to situations where you don’t feel like you’re following through with this internal measure of success and figure out better ways of doing things, you will achieve financial success. These questions guide you slowly toward a very healthy relationship with your money, where it is just a tool to support the things that you most care about in your life, whether it’s parenting or marriage or learning or something else entirely.

A Funny Thing Happened on the Way to the Forum

The story of the last decade of my life has been a slow return to internal measures of success, which means a lot of figuring out what I truly value and then finding ways to live out those things in my daily life.

As time went on, for example, I went from a financial panic of not having enough money to pay my bills to the slow burn of eliminating debt and eventually to the point of realizing that money only held real value and meaning if it was serving some kind of genuine purpose in my life.

I went through similar changes in most aspects of my life. My parenting is about building the foundation of an independent and self-sufficient good citizen of the world, not a facade of a successful child. My marital life is about a deep and infinitely reliable relationship based on trust, not the “perfect marriage” on social media. These things are about what I want and what genuinely matters to me, not about what other people want or think. I started making an effort to treat others exactly how I would like to be treated, rather than excessively lauding some and looking down upon others.

Yet, a funny thing happened on the way to the forum. I now have more meaningful friendships than I think I’ve ever had at any point in my life even though I have less time for social activities than I ever have. Almost every day is filled with a long list of things to do, but they all feel like they have a reason behind them and that the eventual outcome of those things is going to be a good thing.

More than anything, I’m pretty happy most of the time. It’s not because I have lots of things and lots of things to show off, but because I know what I really want out of life and I’m stumbling in that direction, and every step in that direction brings a lasting sense of contentment and joy that exceeds almost all momentary pleasures.

Financial choices play a role in that. If I consciously choose to spend my money in ways that really further that stumbling toward the things I want most effectively and I smartly use what’s left to ensure I can keep gradually moving that way, then I’m pretty happy with where my money has gone.

I’m not perfect at any of this, don’t get me wrong. I make mistakes every day. I waste time. I stick my foot in my mouth. I waste money. I don’t do what I know I should be doing. I mess up and stumble backwards sometimes.

Overall, though, I’m heading to where I want to be, little by little, day by day, and that feels pretty good.

I just trust my internal measures of success, and my financial measure is definitely one of the big ones.

Trust me, you can find it, too. If I can find it, anyone can.

The post Finding Internal Measures of Personal Finance Success appeared first on The Simple Dollar.

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Friday, February 16, 2018

The Financial Value of a Quality Information and Media Diet

Over the last few weeks, the stock market has jumped up and down like a yo-yo. Many readers have contacted me asking if I think they should make moves in their retirement account.

My answer is an almost automatic “no.”

Here’s why. Investing for retirement is a long term plan, one that’s based on sound logic and careful consideration. A good retirement investment plan understands and expects short term fluctuations in investments.

If you have a good retirement investing plan, then the stock market noise of the last few weeks is just that – noise. It doesn’t matter. In fact, it should scarcely raise an eyebrow. Why? The reality is that the day to day fluctuations in the stock market are not actionable news for almost all individual investors who aren’t incredibly wealthy.

The news on the day to day fluctuations of the stock market isn’t worth my time. That might seem to be a stunning thing to hear from a personal finance writer, but it’s true. The day to day bubbling of the stock market isn’t worth my time or attention.

I’m going to go a step further. Information that isn’t relevant enough or solid enough to genuinely inform me or cause me to take action isn’t worth my time.

Now, let’s break down what I mean by “genuinely informing me.” Anything that isn’t causing me to increase my understanding of an issue I already care about in the world, or isn’t alerting me to something that I actually need to take action on isn’t genuinely informing me. All of that stuff is just trivia or pure entertainment. I am not a more genuinely informed person from having read the headline news on most websites. All I’ve done is accumulate a bunch of trivia, none of which is actionable, none of which benefits my life, some of which is incorrect, and virtually all of which is incomplete.

None of that information helps me with my financial plans. None of that information brings me to a deeper understanding of any issue I care about. Virtually none of that information is going to lead me to take action. None of that information is well-researched and well-argued enough to ever make me change my mind. So what value does it actually have, aside from entertainment?

Frankly, it doesn’t have any lasting value, and if it’s just entertainment, there are a lot more entertaining things out there than the news headlines or angry talking heads on television.

For a long time, I persisted under the idea I needed to be “well informed on the issues of the day” in order to be able to have meaningful conversations with people. That just isn’t true. If someone starts talking about an issue and I don’t happen to know much about it, I can continue the conversation by just asking questions and authentically listening to the answers. That might nudge me to learn more about a particular issue in a deeper way, and it’ll certainly forge a better bond with that person, but it doesn’t require me to spend time reading information that doesn’t benefit my life or change my way of thinking.

One of my major resolutions for 2018 was to follow up on this concept and largely cut “junk information” and “headline news” out of my information diet aside from very specific niche areas that I know will be actionable for me. I’ve barely kept track of the latest thing the President has done or the latest celebrity comings and goings or the latest product unveilings. I have drastically cut my time spent on social media, mostly just using it as a tool to directly contact close friends and family members to set up face-to-face engagements.

And, honestly, I’m happier for it.

What have I done instead? I’ve read a number of books on philosophy and recent events/history and self-improvement and some fiction, too. I got more understanding out of what our military is doing from a book by Col. Andrew Bacevich than I got in a year of headline news. I’ve read some well-researched journalism and essays, some of which changed my thinking and others that led me to some action in my life. I watched a few movies for family movie night, cuddled up in the family room with my wife and the children around us. I haven’t turned on a cable news network this year and I’ve scarcely visited what one would call a “news” website, either.

I was a little worried about having conversations with people about the latest news, but I found that if I just ask some good questions and listen, the conversations go really well. People are always happy to share what they’ve learned and we find things to talk about.

Another interesting thing I’ve found is that my desire for new things has fallen off of a cliff. I am becoming steadily less and less interested in new products of all kinds, and that has led to a noticeable reduction in non-essential spending in January and an even bigger fall-off in February to this point. I just don’t have much interest in new stuff right now, and I think it’s due to a conscious shift in my media intake.

Perhaps most of all, I’ve found that I’m almost always better off waiting on a news story because the first reports are almost always highly inaccurate and missing a lot of key details. You almost always get a more well rounded view by waiting a month or two until a journalist has really investigated the issue from a bunch of angles and discovers that the truth is, most likely, somewhere between the overhyped news stories a month ago that were also lacking some key details. That kind of reporting influences my thinking in a rational way; the headline news does not.

So, how can this impact you? I’m going to propose a very simple thirty day challenge for you.

First, for thirty days, stop watching cable news and stop visiting news websites and cut back on your social media to the absolute bare minimum. Cut them all out of your media diet. This might seem hard at first, but trust me – there’s almost nothing actionable or deeply accurate to be found on any of those things. Just focus on not turning on the news for a while and not reading all of the opinions and rantings on social media.

Instead, devote just a little of your day to really learning about something you actually care about or building a skill you wish you had. You can do that in whatever form feels most comfortable to you. You can watch a documentary – for example, Netflix has the amazing Planet Earth II and a ton of Ken Burns documentaries. You can read a book on a topic you’ve always wanted to understand a little better, and read it slowly and take the time to really understand it. Or, you can simply experience something more deeply. Take some walks in the woods or around your town and look around carefully at the details. Listen to the birds sing and the changes going on around town. Engage in a personal hobby you care about with some extended focused time and try to go a little deeper than you’ve gone before – maybe that means playing a more challenging board game or taking on a really tough knitting project. You should have that extra “little bit of your day” available if you’re not looking at the news.

After thirty days, step back and ask how you feel about your life. Are you happier? I’m actually quite willing to bet that you will be. Do you actually understand something you didn’t understand before? Probably. Did you learn something that genuinely shapes your understanding of the world, or something you can take action on? Again, most likely.

Another thing I’ve done this year, which might be useful for you, is I stepped back and asked myself why I believed a lot of the things that I did. Why do I really think this way about that issue? I’ve been seeking answers for those questions, and along the way I’ve found, more than anything, is that other people, almost all of the time, are just acting in an honorable way in accordance with their principles, and that everyone has some human flaws but is usually genuinely trying to live up to the things they believe in. Usually, that “flaw” is getting caught up in a wave of emotion or reacting to a piece of shoddy journalism, which causes a sharper reaction than is probably necessary, but it comes from a place of principle and values.

When I was caught up in the hubbub of headline news, I didn’t give myself the chance to step back and appreciate this. It was easy to buy into the idea that a lot of people were either utterly unprincipled or corrupt, but that simply isn’t true. Almost everyone you meet out there has some values and principles that they really do hold dear and they’re trying their best to act on them and follow through on them.

Stepping back a little might just show you that others aren’t being negative or hateful, but that they really care about something that really matters to them and they’re merely clumsy with their words. That kind of appreciation can salvage a friendship or a professional relationship, and that shift can have an incredible positive impact on your personal and professional life.

So, here are the benefits I’ve found from simply cutting back on the headline news and focusing more on more thoughtful media and experiences to replace it.

One, I’m less emotionally fraught about the state of the world. I just don’t feel as worried as I once was about things. There are too many good things going on that you don’t see if you look constantly at the headlines. Stepping back from the news flow enables you to look around and see a lot of good things going on, like a beautiful sunny morning and a successful park cleanup project and the fixing of a strained relationship.

Two, I’m less motivated to buy new things. I’m less aware of them in general, and I’m far less emotionally motivated to buy anything. I just don’t see the need, and I attribute that to less input from social media and headline news.

Three, I feel like I have a better understanding of several things I care about. There are quite a few issues that I’ve struggled to understand in the modern world and the headlines certainly weren’t helping in that regard. Stepping back and actually making a concerted effort to understand those things has actually helped me shape my worldview and understand the world a little better.

Four, I feel like I have a deeper appreciation of other people, even those who have different perspectives than me. Most people are genuinely good people, who sometimes believe very strongly and deeply about worthwhile things and allow that emotion to sometimes guide them to less kind words than they should be using. When you’re also caught up on the emotional wave of the headlines, it can be really hard to see that, especially of people you don’t immediately fully agree with.

Finally, I feel almost no need to make impulsive financial decisions. I don’t feel the need to impulsively buy things. I don’t feel the need to make big changes to my investments. I’m not worried about the ups and downs of the stock market at all. I have no desire at all to make any major spur-of-the-moment decisions that will impact my finances. That can only be a huge benefit for my financial life.

Give a better media diet a shot for a while. It might help more than you think.

The post The Financial Value of a Quality Information and Media Diet appeared first on The Simple Dollar.

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Thursday, February 15, 2018

Overcoming the Double-Edged Sword of Career Specialization

When I first left college and entered the professional world, I was very lucky to have a marketable skill set that several employers were interested in. I interviewed for several positions and wound up accepting one that I felt really matched my skills well and provided a lot of room for growth.

It was a great experience. However, I felt that, in some ways, my skill set was gradually becoming more and more and more specialized. I was arguably one of the experts in the world in one extremely narrow field, but I often felt like a complete amateur in similar related fields.

On the one hand, it’s a great thing to be an unquestioned expert in one particular area. At the same time… what happens if that area is no longer in demand?

It was that worry – on top of many other ones in my life – that spurred on our financial turnaround and eventually helped to set the stage for a career change. I loved my former career – in fact, I actually still keep up with the field through reading books, talking to old colleagues, and some occasional other minor contributions – but I was unquestionably overspecialized and it was clear to me then (and even clearer to me now) that such overspecialization was a risk to my career and thus, by extension, many areas of my life.

Don’t get me wrong – specializing does have value. It was a handful of particular skills that I picked up in college that opened a career door for me, and it’s a skill set that, with some tweaks, is still in nice demand now. If you have a skill that’s in more demand than there are people out there that can fulfill it, that’s a good thing, unquestionably.

Too much focus on that specialty, though, is overspecialization, and that’s actually a pretty big career risk.

What happens if your employer shifts their focus just a little bit so that your narrow skill isn’t needed there any more?

What if the employment market changes and other companies are no longer hiring people with your super specialized skill set?

What if a better technology emerges and you’re completely unprepared for it?

If all you have is one or two super-specialized skills, those kinds of changes can kill your career.

So, how do you balance it? How do you balance the need to have specialized skills that employers want without falling into the trap of devoting too much to that skill at the expense of everything else, leaving you open to new kinds of career risks? Here are ten strategies for doing that.

Strategy #1 – Take on a Variety of Roles and Tasks

While your specialized skill may have helped you get your foot in the door, it’s very likely that your workplace is at least somewhat dynamic, with different projects coming and going all the time. You can benefit from that for your own career by taking on a variety of workplace tasks and workplace roles beyond simply hammering away at things with your specific specialized skill.

Look for opportunities to be a project or small team leader or to be involved in the creation of reports or presentations regarding your project. Consider actually presenting said reports or presentations. Look for any and all projects that let you work on improving similar skills to your expertise but force you to grow in new ways.

The purpose here is to use your own specialized skills as a way to get yourself into positions where you’re learning and developing more and more skills to complement that specialized skill, all on your employer’s dime. You’re essentially using your job not just to make money, but to make you into a more valuable employee, which can then directly translate into a great case for a raise or many more opportunities on the job market.

Strategy #2 – Look for Opportunities a Bit Outside of Your Comfort Zone

Sometimes, opportunities and tasks are going to come along that are outside of your comfort zone. Take them, even if they seem really scary.

When I was first hired, my understanding of my job is that I would be in a cubicle all day, writing computer code and data analysis. Six months later, the person on our team that was supposed to be presenting our work to other teams and others outside the organization was abruptly let go and, in the interim, that task more or less fell to me, so I found myself presenting in front of large crowds of very competent people.

It was one of the best things I ever did. Not only did it force me to work on presentation and public speaking, which were skills that were new to me and rather scary, it pushed me to the point where such skills were resume-worthy. Furthermore, it pushed me to look at my own work through a new lens – the lens of the outside observer who viewed the project I was working on as a finished tool that they could use for their own work. That helped me greatly in terms of improving my own work, the core work that used my skill sets, over time.

Don’t stay in your safe zone. When an opportunity comes along, particularly one that’s going to really stretch you and be a little scary, jump into it. Not only are you likely to find yourself impressing people and improving your standing at work, you’re also building useful parallel skills and improving your resume for future career moves.

Strategy #3 – Stay Abreast of What’s Happening in Your Field

When I say this, I don’t just mean within the narrow area of expertise, but your broader field as a whole.

I was initially hired specifically for my skills in a particular domain of knowledge, a particular handful of computer programming languages, some database and data modeling skills, and a few other skills that bridged those gaps. As time went on, though, the field began to change a little as new technologies and paradigms became available.

This forced me to get into a habit of staying abreast of what was happening in the field of data mining at large, not just within my own narrow tasks at work. I could have easily kept my head down and kept hammering away with the tools I knew best, but doing that would have led directly to all sorts of new problems as our project fell behind other competitors and became less useful for the people we were serving.

I made it a routine to spend at least a few hours a week – and eventually one whole day a week – exploring what was new in my broader field of data mining. What databases and technologies were people using?

I subscribed to a couple of publications and spent time at work reading them when we weren’t in crunch mode.

I tried out new ideas on my own, tackling completely new things that were well outside of my domain of expertise, but things that could obviously lead to things that might eventually help our customers.

I implemented new data structures and new software development paradigms and saw the enormous benefit that they brought to the table.

Eventually, even with a tiny team, we made some technological leaps that were far ahead of what our competitors were pulling off at the time, and that was largely due to keeping an eye on things outside of what I was immediately working on. It paid off for me personally as well as for our whole team.

What’s happening in your field outside of just your narrow view? Spend some time each week investigating and studying what’s happening in your broader field. Read publications and well-moderated discussions and books. Put some of what you learned into practice. Look for new certifications and hammer those down. Make sure that you’re absolutely ready for whatever’s coming next.

Strategy #4 – Consciously Work on Transferable Skills

Transferable skills are skills that can be applied at a wide array of jobs. Presentation skills. The ability to work as part of a team. Written communication skills. Self-motivation. Self-organization. Time management. Interpersonal communication.

All of those things are skills that are valuable in almost any workplace environment. All of those things are skills that you can consciously and actively work on.

In the past, I listed six key transferable skills that people should work on:

Leadership Can you actually lead a team? Can you herd a group of people towards a greater purpose? Are you self-motivated enough to do this? Can you set goals and actually achieve them? Can you plan large projects and push them forward? How can you get it? Join a community or student organization and take charge of a large project. Later, run for a leadership position within that group. The best way to learn leadership skills is to learn them in the laboratory of life, and organizations provide the perfect opportunity.

Administrative skills Are you able to prioritize the tasks in front of you? Can you analyze information and then describe it in layman’s terms for others to understand? Can you interpret rules and use them effectively? How can you get it? Get involved in the planning of as many large projects as you can. Project planning teaches you many of the administrative skills you’ll need in life. If there is a large project, volunteer to help with the planning – if there’s already a planner in place, learn everything you can from that planner.

Information management Can you actually research a topic? Can you take a pile of research and use it to answer worthwhile questions? Can you communicate those facts to others? Can you manage a budget and handle financial records? Can you use a wide variety of computer programs? How can you get it? If there are opportunities to present anywhere around you, take them, even if you aren’t familiar with the topic. Of particular use are topic areas where you’ll have to do some research in order to get the presentation right. Another great avenue is to volunteer to be the secretary or (particularly) the treasurer for a group. Such activities will require you to carefully manage a large amount of information on behalf of a large group.

Creativity Can you come up with interesting ideas of all kinds? Are you good at coming up with marketing ideas? Are you good at formulating the next step in a process? Are you good at creating visually appealing layouts?How can you get it? Create some websites for groups – and learn how to do it along the way. Whenever there’s an opportunity for brainstorming, get involved and throw out ideas. Creativity is something that is best learned by practice – so practice it.

Interpersonal communications Are you willing to speak in public? Can you communicate your ideas well in writing? Can you lead a conversation? When you communicate with others, do they understand your ideas? How can you get it? Participate in conversations and meetings instead of just sitting there. Volunteer for any and all public speaking opportunities that come your way. Volunteer for difficult and arduous tasks of documentation – that’s the best way possible to practice writing to communicate information.

Personal development Can you use the experiences in your life as a source for growth and personal change? Do you have a personal moral code that you actually follow? Can you effectively and honestly evaluate the strengths and weaknesses of others (both people and things)? Can you deal with stress? How can you get it? Don’t shy away from challenges – step up to big projects. Keep a journal and use it to explore what you really think about things, particularly the people around you.

To that list I’d add a seventh: the ability to learn quickly, which one can practice by being a lifelong learner. Every career twist and turn will throw new knowledge at you and being able to absorb and implement it quickly will help you no matter where your path leads. You can get this by simply taking time to learn new topics on a very regular basis and trying new strategies for learning along the way.

These types of transferable skills will help you no matter what happens to your career.

Strategy #5 – Do Resume-Worthy Things Outside of Your Specialty (Or Even Outside of Your Career)

What do you have on your resume that indicates that you have skills or abilities outside of your narrow specialized skill set? Do you have other skills and talents that you can demonstrate that might be useful, or at the very least demonstrate that you’re not just a one trick pony?

Try to build things in your career outside of your specialty that fit well on a resume, whether it’s something like serving on an organizing team for a conference or building a website about your career. You may also want to take on strong challenges outside of your career, such as taking on a leadership role in a community group or achieving an impressive personal challenge or milestone like earning a martial arts black belt.

The goal here is to have at least a few tantalizing things on your resume that either indicate a broader skill set within your field or demonstrate some type of concentrated achievement that clearly demonstrates the presence of a valuable transferable skill.

Strategy #6 – Have a Very Strong Professional Network

The key to finding the next step in your career often comes from other people in your field that you know well and who have a positive opinion of you and your skills. This is something that can be built and cultivated over time by building lots of positive, strong professional relationships.

There are many ways of doing this, but it starts with being a positive, helpful force in your workplace. Take an individual interest in what your coworkers are doing and what they care about as people. When you can, listen to them and genuinely take an interest in them; don’t just look at conversations as an opportunity to say whatever is on your mind. Also, look for “multiplication help,” which is where you can do something for someone else that provides many times that much value to them, such as giving someone a ride in a pinch or providing a bit of technical expertise at the right moment. Be humble and dole out tons of credit to others for anything you achieve.

Over time, expand that strategy to people beyond your workplace. Start attending local meetups and groups related to your field and build relationships within those groups. Consider attending conventions and conferences related to your field with the same idea in mind.

Whatever you do, strive to use those opportunities to build relationships. Start by genuinely listening and taking an interest in other people; ask questions and listen rather than talking about yourself. Make sure you have a way to continue the connection afterwards, and then actually put in that effort to follow up. When you find out that someone has a need you can easily help fulfill, jump at the chance to do it and ask for nothing in return until you actually need that help.

Strategy #7 – Use Every Single Training Opportunity You Can Get

If your workplace offers any sort of discounted or free training opportunities, particularly those that lead toward certifications or degrees, take advantage of it, every time. You should take the time to gobble up every bit of paid-for education you can, particularly anything that can slip onto a resume and anything that you might even remotely apply in your work.

If you don’t know what programs are available, talk to your human resources officer and see what your company or organization offers. There are often programs in place that are intended to maximize the value of their employees.

Not all workplaces offer opportunities like this, but those that do should be treated as though they’re offering a nice perk to your employment package because that’s exactly what this is. They’re basically compensating you for putting yourself in a better future employment position. They’re handing you the opportunity to gain leverage in future employment and salary negotiations, both with them and with other employers. They’re also making it possible for you to gain a more diverse set of skills so that you’re not locked into one role for the rest of your career.

Take advantage of it.

Strategy #8 – Have Positive Rapport with Management

This doesn’t mean you should become the “office suck-up” or the “brown noser.” What it instead means is that you pay attention to what’s said by management, whether it’s your supervisor or people above your supervisor, and you act in accordance with what they’re saying.

Beyond that, it also means that you ask questions related to both your career path and the future of the business. You don’t hide in your cubicle doing task after task, but instead you seek to gain a bigger picture of what you’re doing and how it fits into the aims of the organization you’re a part of.

A person who puts in the time to gain that bigger vision and to do their best to align their work to that bigger vision is always going to be more of an asset than the person who insists on going their own way and doing things their own way. The only way you’re going to gain that insight into the bigger vision is by listening and asking questions and having conversations, and then applying what you’ve learned from those questions and conversations to your actual work.

Even more important, these kinds of conversations usually give you some pretty clear indication that the winds of change are starting to blow. If you suddenly notice that the management above you is talking about different directions than before, what you have is some breathing time to make sure that you’re ready for that change before others get wind of it. Listen. Ask questions. Think about how that information applies to your work. Act accordingly.

Strategy #9 – Evaluate the Future of Your Field, Learn About That, and Do It All Again

What will your field be like in three years? Five years? What will people be doing? What will they be using?

Do your best to answer those questions, and then invest the time to learn the areas of expertise that you come up with. What’s the big new software that people are starting to whisper about? What new technology is going to break and cause changes in your field?

Don’t fear and resist those changes. Instead, start learning those changes now so that when they come, you skate through the changes like a champ while everyone else is panicking.

Then, ask the same questions again. And again. This is a cycle, not a one time thing. Ask yourself where your field might be in a few years, learn what it takes to be adept in that future version of your field, and then ask again, and learn again. It’s a cycle, but it’s one that takes a lot of risk out of career overspecialization.

Strategy #10 – Have a Strong Financial Foundation

Underneath all of this is the value of simply having a strong financial foundation.

If you have a career that pays well, it is not going to be too difficult to get into the practice of spending less than you earn – ideally, substantially less than you earn. You can then take those extra proceeds and use them to build a strong financial foundation for your life. Pay off debts, build up a nice big emergency fund in savings somewhere with a few months of living expenses in there, and start saving hardcore for retirement and for other big life goals.

Yes, this might mean you skip out on a few forgettable perks along the way, but that’s the thing – financial success is built on the back of giving up the truly forgettable expenses. Your life is not going to be traumatized by closing up some of the air leaks in your apartment or home. You’re not going to be devastated by learning how to cook efficiently at home. Your life is not going to become abject misery if you check out what books and audiobooks and DVDs and Blurays are available for free at the library. You’re not going to feel like you’re in poverty because you bought store brand trash bags or renegotiated your car insurance or considered a smaller apartment. Waiting a month to buy something you really want right now is not going to end all happiness, and often you’ll wind up realizing that you didn’t want the thing anyway.

Yet, it’s those changes that make the difference in many cases. Those kinds of changes in concert can help you get started in building a financial foundation, and it’s that strong financial foundation that can help you through almost any career hiccup with minimal stress and help you feel less stress at work because you’re not sitting there with the threat of no paycheck hanging over your head like a guillotine.

Final Thoughts

Career specialization is awesome right now. If you have a skillset that employers want today, you’re going to be making a nice salary.

Tomorrow, however, the situation may change, and the person that’s ready for that change, with a broader skill set, lots of connections, and a financial foundation, is going to weather the storm better than anyone.

Good luck!

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What the Olympics Can Teach You About Your Credit Scorecard

If you’re like most of us, you’ve probably been glued to your television to take in the 2018 Winter Olympics. It can be captivating to watch the best athletes in the world compete at the highest level in a battle for the gold.

Yet sometimes, Olympic events may leave you scratching your head about how the scoring works. Because no matter how flawless an athlete (or their fans) believe a performance to be, it really all comes down to the judges’ scorecard.

Does that sound familiar?

Whether it’s an Olympic event or a credit report, there will almost always be some level of discontent with the judging process if you don’t end up with the score you hoped for. And this feeling of discontent only becomes magnified when you can’t understand why you were penalized. Like Olympic scoring criteria, the credit scoring system is often very confusing to the average person.

What Is a Credit Scorecard?

Olympic judging employs complicated and precise scoring systems. Take figure skating, for example. In the 2018 Winter Olympics, the International Skating Union (ISU) Judging System is used to evaluate an athlete’s performance. Skaters can be awarded points for overall presentation and artistry, in addition to points awarded for jumps, spins, throws, lifts, and footwork sequences. Each move is assigned a base value, and then a skater can earn extra points for executing the move well — or lose points if the move is executed poorly.

Credit scoring systems are built to follow a very specific set of rules as well. However, unlike Olympic events, credit scores aren’t awarded subjectively. It’s not up to a judge to determine whether your credit report “performed” better than the next person’s report.

Instead, all credit scoring models are legally required under the Equal Credit Opportunity Act to be “empirically derived” and “demonstrably and statistically sound.” What this means is that credit scoring models must be built using a scientific process, not assumptions or subjective interpretations, and they must be proven to work reliably before a lender can use them.

At the heart of any credit scoring system is a series of scorecards. A scorecard is the actual engine that evaluates the information on your credit report, tallies up the points your report earned in different areas, and then awards you an overall score, which reflects your level of credit risk.

You can earn points for not having any missed payments, having low credit card usage, having a good mix of account types, and applying for credit sparingly. It is easy enough to understand at a high level, but when you dig in deeper, the process becomes more complicated.

Different Credit Report Types, Different Scoring Rules

Another way credit scoring differs from the scoring you might see in an Olympic event is the fact that, where credit scoring is concerned, not all people will be judged using the same set of rules.

Credit scoring systems employ a multi-scorecard approach. Homogeneous populations — those that have similarities in their credit profiles — are grouped together so that their reports may be scored in a similar fashion.

The reason different groups of people are judged using different systems is because each group poses a different level of risk to future lenders. Consumers with clean credit reports do not represent the same risk as people who have filed bankruptcy. Consumers with “thin” credit files (not much credit) represent a different risk than consumers with more extensive credit histories.

It’s also possible to hop from one scorecard to another. For example, as time passes and you establish more credit, you might move from a thin file scorecard to a clean credit scorecard (assuming you have no derogatory information on your report).

If you do hop to another scorecard, then the scoring rules change entirely. Everything on your credit report may be evaluated differently, and the score you’re awarded may change with very little notice or plausible explanation.

Winning Gold

The bottom line is this: Regardless of the Olympic event, those who perform the best — the figure skaters who leap and land with grace and precision, the snowboarders who make a double cork 1080 look easy — generally walk away with the medals.

The same can be said for credit scores. Those with the cleanest credit reports — who religiously pay their bills on time and avoid testing their credit limits — generally end up with killer FICO and VantageScore credit scores.

Related Articles: 

John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. He has written four books on the topic and has been interviewed and quoted thousands of times over the past 10 years. With time spent at Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.

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Wednesday, February 14, 2018

Serenity and Personal Finance

God grant me the serenity
to accept the things I cannot change;
courage to change the things I can;
and wisdom to know the difference.

– Reinhold Neibuhr

Serenity is simply the state of being calm, peaceful, and untroubled. I find that I feel something close to what one would call serenity after a good day hiking in a state or national park with friends or family, when I don’t have anything important or urgent bearing down on me.

Of course, there are a lot of things that interrupt that kind of serenity. General anxiety can rip it to shreds. Addictions. Marital worries. Parental worries. Social worries. Professional worries. And, yes, financial worries.

There’s this challenging interplay between serenity and personal finance. When your finances are in a bad place, your finances can erode your ability to find serenity anywhere. Financial problems looming over your head are incredibly stressful and fill even ordinary moments with a layer of underlying stress and anxiety that you basically can’t escape from.

However, as your finances slowly improve and you begin to build a financial foundation for the future, your finances actually contribute to serenity. You begin to feel a certain protection from things that once began to worry you and a lot of stress just evaporates from your life.

I firmly believe that getting your finances in order is a powerful tool for finding serenity in modern life. At the same time, there are many techniques that will help guide you toward serenity without harming your financial state.

Let’s look at a few of both.

Finding Serenity Under Stress

You really don’t need to go to some expensive weekend retreat or start going to a special class or buy a special “brain wave” headband or anything like that to find a little more serenity in your life, no matter how expensive it is. You just need to add a few very simple practices to your life.

Try to do things with intention. Whenever you do something, do it with a purpose. If you can’t give a clear, positive answer to why you’re doing something, don’t do it and find something else to do. It is a lot easier to feel happy about what you’re doing with your life if most of the actions have a meaningful purpose for you, so try to find that purpose, and if you can’t, stop with that action.

Consciously aim for the positives in life. What are the things you’ve done in everyday life that make you feel good about your life? Was it some charitable work you did? Was it when you really listened to a friend? Was it when you just gave yourself over completely to a hobby you enjoy and lost track of time doing it? Find space for those things in your life, as much as possible, even if it means discarding a few other things that you think should be important to you but really aren’t.

Start a gratitude journal. Just take a few minutes each day to think about five things in your life that you’re grateful for, things that make your life better by their mere presence. Maybe it’s something as simple as a friend’s laughter or the flavor of a cup of dark roast coffee. Whatever it is, if it makes your life better, write it down. Do this over and over again over many, many days and you’ll start to see how abundant your life really is.

Breathe. If you’re finding that you’re unhappy with the state of your life, just stop for a moment and breathe. Breathe in. Breathe out. Breathe in. Breathe out. Do nothing but focus on the breath for a minute or so, preferably with your eyes closed if possible. You’ll find that if you do this, things are somehow a little more manageable afterwards (because, believe it or not, this practice sets off a ton of good biochemistry in your body and mind).

Using Financial Success to Find Serenity

Of course, moving yourself down the road of financial success can also help with achieving personal serenity because getting the biggest financial worries off your back goes a very long way toward minimizing stress, and simply having financial resources in your hands eliminates many concerns about the future.

It goes further than that, though. Many of the best practices for achieving financial success also bring along with them a sense of serenity because of how they impact other areas of your life, such as how you think of yourself in relation to others in a more positive way.

Here are four examples of that.

Stop buying things you don’t actually need. If this isn’t something you really need, don’t buy it. Give it time to see if it’s a truly deep want or just a short term desire. If you can, borrow it instead of buying it. This practice not only keeps your money in your pocket, it also keeps you from accumulating lots of things in your home that you individually have less and less time for (because of the sheer number) and spend more and more time managing and organizing instead of enjoying. Go a little minimal and stop adding things to your life that you don’t have time or space for, and you’ll be improving your financial state, too.

Stop worrying about impressing people you don’t actually care about. Don’t worry about dressing to the nines to go to the grocery store. Don’t stress out about driving the nicest car because no one on the road or in the parking lot cares who you are. Don’t buy an amazing house just to impress the people who drive by, who also have no idea who you are. Don’t buy any of those things to “impress” friends and acquaintances who know you so little that they’re actually impacted by what house you live in, because those connections are pretty minor anyway. Stop worrying about what other people think of anything you do, and instead do the things that matter to you (and maybe your true core family and friends) and no one else.

Stop worrying about name brands on the stuff you buy. Name brands really don’t mean much in the big scheme of things. They’re rarely even good indicators of the true quality of an item. Buy store brand items for minor things, and for expensive things, do the homework to figure out what the best bang for the buck for that item is. You’ll often find that the best values out there aren’t the name brands you initially think of. Why is that? The name brands you initially think of are often pounded into your head by a big marketing budget, not by any sort of actual product quality. Don’t choose marketing. Choose value.

Use that saved money to eliminate debt, build an emergency fund, and start saving for life’s big goals. If you genuinely commit to those three steps, and add in a few smart money-saving tactics that simply reduce spending without reducing life quality like switching to LED light bulbs and installing weatherstripping in your home and making sure your car tires are fully inflated, you’re going to see a big drop in your monthly spending. Don’t simply start spending that money on more stuff. Spend it instead to build a financial foundation. Pay off your debts. Build up an emergency fund in your savings account so you can deal with unexpected expenses. Start saving for retirement or, if you have children, for their college education.

Final Thoughts

Almost all of us want serenity in the moment, a sense of internal peace and calmness. There are lots of little ways to grasp it for a moment or two before the flow of life carries us away from it.

It’s a little harder to find lasting serenity. One big approach for doing that is to get rid of some of the biggest sources of stress in our lives and, ideally, turn them into sources of strength. Good personal finance practices can do just that.

These tips together can help you find serenity in the moment without financial cost and can also help you build a life in which lasting serenity is a real part. Moving from an extremely shaky financial situation to a firm financial foundation can do just that.

Good luck.

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One Year Later: How We Make It as a One-Car Family in the Suburbs

A little over a year ago, my husband and I faced a decision: what to do with my old, beat-up minivan. Even though the van had been paid off for a while, it was starting to cost us more than we wanted to pay in terms of updates and repairs. I had spent around $700 on new tires and several hundred more on new brake pads in just the prior year. Since the van was worth $4,000 tops, we were growing tired of pouring money into it.

After talking it over, we started to wonder whether we could get by with just one car. It would be a bit of a challenge: We had owned two cars for our entire marriage, after all, and we have two kids who don’t always participate in the same activities. Plus, while more than half of New Yorkers get by without any car at all, we don’t live in a big city with a subway system to fall back on.

But in the end, we decided it seemed silly to have two cars since we both work (mostly) out of our home. Ultimately, that meant selling the van to a family friend for $3,500. Not only would this put $3,500 cash in our pockets, but this also meant we could quit paying for oil changes and repairs and cancel the insurance, too. Better yet, we would gain half of a two-car garage for storage and whatever else we wanted.

How We Make It Work as a One-Car Family

It’s been well over a year now, and our adventure as a one-car family has gone off mostly without a hitch. Here are some of the issues we’ve had to negotiate to make it work:

#1: It’s essential that at least one of us always works at home.

First off, without a subway or other transit system handy, our life as a one-car family wouldn’t be possible for us if we both worked outside the home.

We have our own businesses, which means that one of us is almost always here at the house during the work day. Usually it’s me, and I don’t mind being here without a car at all.

Either way, I know there’s no way we could make this work if we were to ever go back to traditional 9-5 jobs. With that in mind, having at least one of us at home is essential to our ability to remain a one-car family.

#2: We use Uber and other services in a pinch.

One of the biggest secrets to our success as a one-car family is the fact we rely on Uber and other ride-sharing services when we’re in a bind.

For example, I travel some for my work and occasionally have to get to the airport first thing in the morning. When that happens, I pay around $44 for an Uber to the airport instead of having my husband wake our kids or leaving them without a car. Then, when I arrive home, I either Uber home or have him pick me up.

Also, I used to worry about what I would do if we really needed food and my husband was gone with the car. But now that I’ve started using grocery delivery most of the time, that worry has completely disappeared. Chalk up another win for having groceries delivered instead of schlepping to the store.

On the rare occasion one of us goes out with our friends, we also use Uber or ride along with someone else instead of leaving the other person stranded.

#3: We ride bikes when we can.

Because we live near the center of our city, it’s possible to ride our bikes to some destinations as long as the weather is good. This has allowed us to ride bikes to certain events when my husband has the car – like my kid’s piano lessons or to our friend’s house across the neighborhood. We’ve also ridden bikes to birthday parties a few times when my husband had to be one place with the car and at least one of our kids had to be somewhere else.

Since there’s a gas station and convenience store right outside our neighborhood, we could also ride bikes there if we were desperate for hot dog buns or Tylenol. When my kids were younger, I don’t think I would have felt so comfortable doing this. But, it works fine now that they’re ages 6 and 8 (and almost 7 and 9, they’ll have you know).

#4: We plan to rent a car in certain situations.

While we haven’t had to rent a car yet, we know the time is coming where we will likely have to pay for a multi-day rental. If my husband drives out of state by himself to see my in-laws, for example, he would need to rent a car because it wouldn’t be okay to leave me stranded with the kids for days at a time.

And, what happens if our only car has to go into the shop for repairs? In that case, we already know we’d be on the hook for a rental while it was getting fixed.

Also, we justified keeping our minivan for far too long due to the fact you could lay the seats flat and use it to move large items. The thing is, we rarely took advantage of this outside of spring when we used our van to haul mulch. If we need a truck to haul mulch or anything else, we can always rent one or borrow one from a friend, right?

Why Being a One-Car Family Is Worth It

At this point, you’re probably wondering whether the money we save by not having a car has made all those sacrifices worth it. Paying $45 for an occasional Uber trip certainly adds up, as does grocery delivery and other services we may have to access.

The thing is, I still feel very confident that we made the right decision – financially and otherwise. Here’s why:

  • We saved $300 per year on auto insurance. Once we removed the minivan from our auto insurance policy, our premiums went down around $150 per six months, or $300 per year.
  • We no longer have to pay for license plates. Until we sold the van, we were paying around $100 per year to renew our license plates.
  • We eliminated the prospect of costly repair bills. The biggest problem with keeping our old van was the many “what ifs” that came with it. What if it needed more expensive repairs? Since it was an 11-year-old model and sat mostly unused, we worried a lot about how much it might cost to maintain it in the future. Now those worries are gone.

With these details in mind, I’m fairly certain we’ve saved a bundle by selling our car. The $300 we’re saving on auto insurance and the $100 we paid for plates can pay for a lot of Uber rides, and the elimination of repair bills means we won’t be out thousands of dollars to fix the van in the future. Plus, after we sold the van, we put $3,500 cash in the bank, knowing full well that the van could only be worth less and less with each passing year.

However, the best part about all of it is the peace of mind we gained. I love having one car for the simple fact it makes our lives much simpler than they were before. Now, we only have one car to clean and maintain, and we only have one oil change schedule to remember. We only have to renew the plates once each year, and we only have to worry about repair bills from one car at a time. And yes, we have more room in the garage, which is something I truly appreciate.

The Bottom Line

Can everyone share a car with their spouse? Absolutely not! When you have two adults going in different directions every day, without a subway or useful bus system to help out, sharing one car could easily become a nightmare. Still, there are plenty of instances where people could share a car, but don’t. I know, because we were those people for years until we decided to sell the old minivan.

Nowadays, I’m perfectly happy with the fact I don’t have my own car. I don’t care if people think it’s weird, or if they wonder if we’re a one-car family because we can’t afford a second one. What I crave most at this point in my life is simplicity, and having one car has definitely delivered on that front.

Holly Johnson is an award-winning personal finance writer and the author of Zero Down Your Debt. Johnson shares her obsession with frugality, budgeting, and travel at ClubThrifty.com.


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Tuesday, February 13, 2018

Putting the 10/10/10 Rule to Work in Your Life

Recently, I came across an article by Chip and Dan Heath in Fast Company magazine, entitled The 10/10/10 Rule For Tough Decisions. In it, the Heaths discuss a framework for analyzing choices that they originally picked up from Suzy Welch, a framework that they call the 10/10/10 rule.

Here’s how it works. Take a decision in your life – any decision. Maybe it’s whether to buy that celebrity gossip magazine in the checkout aisle. Maybe it’s whether or not to stop and get an order of chicken nuggets after work when you’re feeling hungry on the way home. Maybe it’s something else entirely.

Before you make that decision, ask yourself three questions.

How will I feel about this 10 minutes from now?
How will I feel about this 10 months from now?
How will I feel about this 10 years from now?

The choice that pops out of those questions with the best overall results is the choice you should probably make.

The best way to see this idea at work is with a few examples.

Example #1: Should I Buy This Not-Entirely-Necessary Item?

Let’s say I’m considering buying, say, this iPad Pro, to touch upon a reader mailbag question from yesterday. I really want it and can envision some uses for it, but it costs $700.

How will I feel about this 10 minutes from now? I’ll probably be really excited to have that fresh new iPad under my arm, taking it home to unwrap it and play with it for the first time.

How will I feel about this 10 months from now? This is the tricky part. If I honestly use it a lot, I’ll probably be at least somewhat happy with it, but how truly likely am I to be using it on a daily basis? Is it something I’m going to pull out several times a day? Or even once a day? When will it replace my phone usage and my normal computer usage and my Kindle usage? Are there really enough situations in there where I’ll be using this enough to make it feel like a great purchase 10 months from now? I can’t give this an emphatic “yes,” that’s for sure. This isn’t to say that the iPad is a bad device, it’s just a question as to whether I personally would use it.

How will I feel about this 10 years from now? I likely won’t be using it in 10 years – in fact, it’s extremely unlikely. I really doubt that I would trade my experience with that iPad for the $600 I paid for it at that point. I could be wrong, but I can’t imagine I wouldn’t rather have the cash. The only exception to that is if I used the iPad Pro a ton and really extracted a lot of learning and life value from it, probably more than I can realistically expect.

So, after funneling the decision through those questions, I’m probably not buying an iPad Pro.

Example #2: What Should I Eat?

I’m hungry. What should I eat? I’m currently about to leave a meeting and head home, so I have a lot of options. How about stopping for a yummy treat on the way home?

How will I feel about this 10 minutes from now? I’ll be glad I did it because I’ll be stuffing my face with something delicious! The tastier, the better!

How will I feel about this 10 months from now? My feelings at this point probably involve what exactly I chose to eat. If I chose to eat something healthy and something relatively inexpensive, I’m probably okay with it. The big negative impact on my life at this point is probably my weight – if it was a high calorie food, I probably regret it a little because it contributes to any extra weight I’m carrying around. I also probably care at least a little about the cost of the food that I ate. Ideally, I would prefer that I chose something inexpensive.

How will I feel about this 10 years from now? At this stage, I probably care more about the nutrient quality of the food alongside the calories. Did that food contribute to things like heart disease or hypertension or diabetes? If it did, and if I’m suffering from those ailments, then I likely really regret eating that food. I still care about the cost of what I ate – again, I prefer something inexpensive from this vantage point.

Given those questions and answers, I’m probably better off seeking a healthy snack by stopping at a grocery store and picking up a low-cost and fairly healthy item like a veggie wrap or some unsalted nuts.

Example #3: Should I Exercise?

I’m sitting here in a slump. Should I exercise?

How will I feel about this 10 minutes from now? I’ll probably feel miserable, because I’ll just be starting with the exercise. While there is definitely an “exercise high,” for most people it doesn’t show up right at first. For many, exercise really isn’t fun, especially at the start. So, at the “10-minute” mark, exercise probably isn’t a big winner.

How will I feel about this 10 months from now? At the 10-month mark, though, you’re probably happy about that exercise session. It’s long over and it likely contributed in a positive way to your sense of well being and to your health, especially if you chose to do it regularly.

How will I feel about this 10 years from now? The feeling at the 10-year mark is probably the same as the 10-month mark, especially if you kept up with it, but it’s probably a good choice even if it was a one-time thing or even just a short period of exercise.

The three questions as a whole nudge you toward exercise, but it’s probably worth your time to figure out a kind of exercise that you can enjoy or at least tolerate. For me, at least, I found that in defensive and meditative martial arts, which actually then made other exercise that prepared me for it much more tolerable, along with hiking.

Seven General Principles

The 10/10/10 rule really stands on top of a handful of smart principles that can guide you to some really great results in life. Let’s dig into seven of those core principles.

Processing your regular life choices through these questions during your spare moments is a really useful thing to do. The 10/10/10 rule is really just a way to get you to think about your choices a little more carefully, with an eye to thinking about things in the long term with a very specific prompting. “What will you think about this choice 10 years from now?” is a really, really good way to think about the long term ramifications of a decision that you’re about to make.

I find, again and again, that if I make this kind of self-reflection into a healthy, normal routine in my life, I usually start heading in a better direction because I’m guiding my choices in a better way. If I make most of my choices on instinct, they’re not necessarily bad choices, but they’re usually geared strongly toward the short term. If I step back and think about my decisions for a while, reconsidering recent ones I’ve made and thinking about ones that are coming up soon, I usually make ones that consider the long term future more often, and those result in better long-term results.

Everyone’s methods of self-reflection are different. I find a lot of value in journaling, in meditation, and in spending time when I’m driving reflecting on these questions. Different people find different ways that work for them. I’ll just say that time I spend reflecting in this way is time that’s almost always repaid through much better choices.

The option that feels good at the 10-year horizon will almost always lead to the best life, but it’s often not very enjoyable right now. While it’s not always true, I usually find that the shortest term perspective and the longest term perspective are pointing in opposite directions when I consider a choice. Something that’s great in the long term, for example, is almost always hard in the short term.

This is the exact reason why many people get deeply in debt. This is the exact reason why many people get out of shape. This is the exact reason why many people find their career stagnating. The option that is obviously the right thing to do over the long run is often the option that is obviously miserable today.

It’s much easier to sit at your desk and read Facebook or check Amazon than it is to go the extra mile on a big project, but it’s the person that goes that extra mile and puts their nose to the grindstone today is probably going to be your boss tomorrow.

It’s much easier to binge-watch a Netflix series than get up and exercise, but it’s the person that goes out there and exercises that will be the person that looks better and feels better 10 years from now and is able to do all of the things you wish you could be doing.

It’s much easier to just buy that treat for yourself on the credit card, but it’s the person who finds low cost enjoyment and entertainment who will be looking ahead at an easy approach to retirement while you’re panicking about not having anything saved.

Similarly, the option that feels good in the next few minutes is almost always going to be the best option right now, but it’s often terrible in the long term. This is really the flip side of the above principle, but instead of thinking about the long term benefits of a hard choice right now, it’s about thinking of the long term costs of the easy choice right now. Again, the thing that’s good right now is often bad in the long term.

That sugary treat looks really tempting right now, but if you gobble it down, you simply increase your risk of diabetes and heart issues and hypertension and simply being overweight 10 years down the road.

That new Netflix release and that comfy couch look great, but if you flop down without exercising today, you ensure that you’ll be in worse shape in 10 years and less likely to be able to keep up with friends or coworkers or children or grandchildren, or even to manage simple things like carrying a basket of laundry up the stairs.

That social media site is really tempting, but if you spend your next hour clicking around to see what everyone else is bragging about, you’re going to find yourself just a little more behind at work, which in 10 years adds up to a much higher chance of a missed promotion or a missed career advancement opportunity.

Long term choices, done consistently and in large numbers, create an exponential curve of quality of life over time. One regular argument against making the long term choice is that this one session won’t really make any sort of noticeable difference. If you exercise once, will it really make you healthy in 10 years? If you spend less money once, will it really have a financial impact in 10 years?

The thing to remember, always, is that long term choices that seemingly have a small impact start establishing a pattern of behavior. If you exercise today, you’re a little more likely to exercise tomorrow, and if you exercise five days in a row, you’re a little more likely to keep it up. Over time, it’s that consistent exercise that will make the big difference, and you make that first decision right now. You’re not only choosing to exercise today, but you’re literally making it easier to make that choice tomorrow and the day after and the day after. Your body becomes more used to exercise, and you figure out ways to exercise that are both fun and challenging. You’re not going to do that just sitting there, and you’re also not going to do that during your first session which might be less than optimal. Each session gets a little better, and the long term outcome gets a little better, too, and soon you’re skating off in a much different and much better long term direction.

You can see that in finances, too. The choice today to buy one store brand item instead of a name brand item isn’t going to change your financial state radically 10 years from now. However, what it will do is show you that store brands really aren’t that bad – in fact, you’ll probably notice no difference at all. You’ll buy that store brand item again and you might consider more and more store brands with future purchases. Each of those little steps becomes easier and easier and the sum of them adds up to some powerful long term changes in your life.

It is a lazy trap to conclude that the long term consequence is small as a way to “permit” yourself to make a very short term decision. The response that many people make to “excuse” the strong short term desire is to think that this one easy choice isn’t going to be a big deal and then go for it anyway because they perceive the short term impact as big and immediate and the long term impact as small and inconsequential. One sundae won’t cause diabetes. One book won’t cause debt and poverty.

The problem, of course, is that one or two short term choices quickly become a pattern of short term choices. If you skip exercising to binge-watch Netflix, it’s probably more likely that you’ll skip exercising tomorrow to binge-watch Netflix, then skip it the day after that to get some chores done, and then before you know it you haven’t been breathing heavy in six months.

If you splurge on a treat today, it becomes easier to talk yourself into another splurge in the near future, and so on, and the long term result of that pattern is much lower savings and (likely) much higher debt.

In other words, it’s not the individual short-term focused choice that’s the issue, but the fact that it begins to set a pattern of short-term choices that ends up collectively pointing at a worse long term outcome.

The best decisions are the ones that are strong winners at one time horizon without being bad at the other time horizons; it is well worth your time to figure out strong answers like this for common, repeated choices in your life. I tend to lean toward decisions that are the best at the 10-year time horizon whenever possible, but there are certainly times when the really good short term decision is the right one to make. The challenge is making sure that you’re including options that are really good answers to one question without being disastrous answers to another question.

So, let’s say you’re hungry and want something tasty. The best way to sate that is with a food that you like (short term!) that’s also something that’s low calorie (medium term!) and healthy (long term!) and ideally low cost (medium term and long term!). The time you invest finding a repertoire of foods that meet those criteria. Try lots of different options. Yes, some of them might end up being short term bummers because you end up not liking them so well, but when you find ones that are great in the short term and great in the long term, all of that effort is worthwhile. You now have a great answer to all of those questions at once!

It’s that exact logic that moves me toward doing things like exploring all of the free and low cost entertainment options available to me. If I find a number of free entertainment options that I like, then I’ve solved the short term “entertain me!” question and the long term “money” question at the same time.

It’s that logic that pushes me to try to find work practices that are as enjoyable as possible for me. What tasks do I work on that I personally enjoy the most? Can I tweak my job to do more of those things? What areas at work would I really like to be doing the most in 10 years, and how can I make it enjoyable to learn more about them? Again, addressing those questions means that I’m happy in the short term (doing things that are at least okay instead of things I hate!) and in the long term (being productive leads toward more career options!).

Finding those solutions that work for you takes time. It’s worth that time. Having ready-made solutions that are at least good, if not great, at the short term, the medium term, and the long term is a great place to be, but it takes some time and some effort to find them.

You’re not going to be perfect at this, but that’s okay. Never forget that the perfect is the enemy of the good. As you ask yourself questions like these and strive to make better choices, you’re going to find that you still sometimes dive for the short term choice that’s obviously disastrous in the long term, or you put yourself through some miserable moments in order to barely make any progress toward a long term goal.

Those things happen sometimes. We all make the wrong choice sometimes, and that’s fine. We’re human.

The true mistake is allowing your mistake yesterday to nudge you toward another mistake today. Just because you’re not perfect does not mean you can’t be great. It just means you’re not perfect. Just because you made a mistake yesterday doesn’t mean it’s all over, it doesn’t mean you’re a failure, or anything like that. It just means you’re human.

Today is always a fresh choice. Don’t let the baggage of the past steer it to a less-than-optimal outcome.

Final Thoughts

If you want to move your life in a direction where your natural daily choices are going to guide you toward the long term outcomes you desire, like naturally choosing to spend less so that you have a great financial foundation for the years ahead, there are few better things you can do than using the 10/10/10 rule to question your regular decisions.

Just think about those decisions and ask yourself:

How will I feel about this 10 minutes from now?
How will I feel about this 10 months from now?
How will I feel about this 10 years from now?

Then, use the results of that questioning to try to find options that will get a big positive out of all three answers.

This is a great exercise for handling your thinking on all kinds of financial, professional, and personal matters, and it will absolutely guide you to better outcomes.

Good luck!

The post Putting the 10/10/10 Rule to Work in Your Life appeared first on The Simple Dollar.

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Six Things to Look for in a Life Insurance Policy

If you’re an adult with a house, a spouse, kids, or any financial liabilities, and you don’t have a life insurance policy already, getting one should be near the top of your to-do-list. With life insurance in place, you won’t have to lose sleep worrying about the financial burden your loved ones would inherit if you were to die unexpectedly.

But, how much life insurance should you buy? And what type of life insurance would work best for your needs? Those are tough questions, and according to the experts, it depends.

Here at The Simple Dollar, we’re a big fan of term life insurance since it’s affordable to purchase and fairly easy to qualify for if you’re in good health. In terms of how much coverage you need, many life insurance agents suggest you purchase five to 10 times your income in coverage ($250,000 to $500,000 for every $50,000 you earn). However, you may need even more coverage if you have a lot of liabilities, or kids, or expenses coming up in the next 10 to 30 years.

The length of your ideal policy also depends on your personal circumstances. If you’re fairly young and want income replacement for your entire career, then a 30-year term policy could be ideal. If you’re older, or you have few debts and tons of savings, on the other hand, a shorter-term policy might be better.

At the end of the day, it’s smart to think through how much coverage you need and how long it should last. However, you should also keep in mind that any coverage is better than nothing.

What to Consider When Buying Life Insurance

But, what should you look for in a policy? And how can you know whether the life insurance you’re considering is actually ideal for your needs? Because of the wide selection of life insurance companies and policy details available, it’s smart to conduct some due diligence before you dive in.

To help with the process, we interviewed Chris Huntley, president of Huntley Wealth & Insurance Services and author of “25 Best Ways to Save 50% (or More) on Life Insurance.” Here are the main factors Huntley says you should look for – and try to steer clear of:

#1: Affordability

When I wrote about why I would never buy whole life insurance last year, I shared some basic quotes I received for both whole life and term life insurance as a 37-year-old woman. Long story short, a 20-year term life insurance policy for $750,000 would set me back $717.50 annually, while a whole life policy with the same amount of coverage would have cost $9,875 per year.

This is obviously a huge disparity, and one consumers should know about when weighing the pros and cons of buying whole life or term life. While whole life insurance provides a death benefit your whole life (until you die), it’s a stretch to say the benefit of perpetual life insurance is always worth the added expense.

As Huntley notes, however, scoring an affordable life insurance policy is not only important now – it is important for the future, too. That’s because, when life happens and times get tough, life insurance is often one of the first items people stop paying for.

If you buy a policy that’s affordable, you’ll be much more likely to be able to hold onto it if you have to make any serious cuts to your budget.

“The problem is, if you let your policy lapse, you might find it incredibly expensive to reinstate, or even impossible if your health has changed,” says Huntley.

The bottom line: Plan on a premium you can afford to pay long-term, he says.

#2: Immediate Payout

Huntley notes that, if you see a commercial on TV offering you quick and easy coverage with no medical exam, it’s probably from a company that offers what’s called “simplified issue” life insurance. Because there are few questions on the application and no exam, it’s true that you can easily qualify for these type of policies.

However, there’s often a two- or three-year waiting period after purchase before they’ll pay out 100% of the proceeds upon death. If you want life insurance coverage that starts right away, this is obviously imperfect.

Huntley says that to make sure your policy pays 100% of the “face value” from day one if possible. “Stay away from simplified issues policies unless it’s a last resort,” he says.

#3: Underwriting Leniency

You could be making a huge financial mistake if you buy a policy from a company that does not treat your particular health or personal activities fairly, says Huntley. Companies range widely on how they price out risks like diabetes, smoking, travel outside the U.S., or your family’s medical history.

“Be sure to speak to a knowledgeable independent agent who can ‘shop’ various companies to find the best rates for your particular situation,” says Huntley. If you don’t, you risk overpaying for a life insurance policy – or not being accepted altogether.

#4: Automatic Payments

While there are certain bills you may want to pay manually, life insurance is one of those recurring expenses that is usually best set up as an automatic bank draft or credit card charge – especially in the case of term life insurance where your premium stays the same.

The reason for this is simple: If you forget about your life insurance bill and don’t make your payment on time (or within your grace period, which is usually 30 days), your policy may be cancelled altogether. At that point, your issuer may not allow you to pay back your missed premiums, and they’re not required to reinstate your policy, either.

Look for a life insurance company that will let you pay your monthly premium automatically, and you’ll never have to worry about letting your policy lapse or missing a bill.

#5: Conversion Feature

If you’re looking into term life insurance, beware of policies that don’t allow you to “convert” your term policy into a permanent one, says Huntley. This feature typically allows you to exchange your term policy for a permanent plan (such as universal life or whole life) without proving you’re still healthy.

“If you buy a 20-year term life insurance policy, for example, and decide after 19 years that you still need coverage but have developed some medical conditions since your initial term purchase, the conversion feature would allow you to keep your coverage, whereas you may not be able to qualify if you were to go back out to the market for a new policy,” says Huntley. “Most term policies include a conversion feature, but not all, so be sure to find out.”

#6: Living Benefits

Huntley says that, thanks to a new wave of life insurance companies striving to meet consumer needs, there are more ways than ever to use life insurance while you’re living.

For example, many newer policies give you the option to receive payments if you get a chronic illness or need to be placed in a care facility, Huntley says. “Several companies also give you 20- or 25-year windows at which you can get back some or all of your premium paid into the policy if you no longer want or need the coverage,” he adds.

If you want the option to get cash out of your life insurance policy if you get cancer or need end-of-life care, then looking for a company that offers this option is a smart move.

How to Save Money on Life Insurance

Now that you know what to look for in a life insurance policy, you need to know the best ways to score a policy at the perfect price. As you shop for life insurance, consider these money-saving tips:

  • Compare the costs of term and whole life before you buy. If you decide whole life insurance is best for your needs, that’s perfectly fine. But you still might want to shop around for term life insurance so you can compare costs. In the example I shared above, whole life insurance could have cost me $9,000 more per year for the same $750,000 in coverage as a term policy. In the case of such a big disparity, you might discover you’re better off buying term life insurance coverage and saving the difference yourself.
  • Get several quotes online. Applying for life insurance coverage online or with a broker that sells multiple policies is a much smarter move than visiting a life insurance agent that works with a single company. Ideally, you’ll want to get quotes from several companies so you can compare costs as well as policy details.
  • Don’t buy way more coverage than you need. Buying the right amount of life insurance (and not too much) is one way to cut down on costs. A good life insurance calculator can help you figure out how much coverage you need.
  • Buy now, not later. Last but not least, don’t put off your life insurance policy for another year – or even another week. The rates you’ll pay for coverage will go up every year, no matter what. The sooner you buy, the better chance you have at affording the level of coverage you need.

Holly Johnson is an award-winning personal finance writer and the author of Zero Down Your Debt. Johnson shares her obsession with frugality, budgeting, and travel at ClubThrifty.com.

Related Articles:

What do you look for in a life insurance policy?

The post Six Things to Look for in a Life Insurance Policy appeared first on The Simple Dollar.

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