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I write this blog for a handful of reasons, but one of the main reasons I started writing was for my own education, or more accurately, my ability to use what I learn when I need it. As How We Learn by William Glasser states, teaching is the best way to absorb knowledge.

Even if no one reads anything I write here, I’d still write it just because I know it’ll help solidify what I learn, or think I already know. It helps writing about things that interest you, and if you can’t use something you learn, then from my experience, thinking creativity about something new is the next best thing. It’s about putting new ideas into strange situations, which makes them “snap” into the brain because of the extraordinariness of what you’re doing. I frequently invent conversations in my head, so I can bounce ideas around and see what feels right, and putting some of that on paper or online, forces me to pick a side, even if I’m not fully on board with it. This helps make a splash in the brain, which is important when you want to recall that information, and that’s crucial when you manage your money once or twice a year.

Short post, and one of my last for the next few weeks. I’m leaving for my Southeast Asia trip next week, and I’ll be gone and disconnected for a good two weeks, so I probably won’t post but one more time before June. But, I’ll be back for sure.


lolly pop

I had dinner with some friends at my house last Friday. We had the usual fun, and a couple glasses of wine into the night, we’re all rather chatty. At one point, we hit on work related topics – a different kind of fun, which I usually try not to get drawn into at friendly dinner parties. As you know from my last post (you have read everything at this blog already, right?), I’m giving my opinion more and more on these topics because I’m getting more and more tired of hearing similar stories and letting certain beliefs stand. We hit on the topic of paying dues specifically, and my view is much along the line of Penelope Trunk’s, “Paying dues is so old school.” I’d actually go a step further, though, and say that paying your dues is you getting the wrong end of the stick.

There are a number of cultural and environmental reasons why this change is happening, and is inevitable for most industries. Inevitable or not, though, it’s an insincere power structure that provides no real long term benefit to organizations that facilitate such social structures. The concept of paying your dues is a waste of resources that establishes unfriendly, boring, and corrosive interactions between workers.

As I realize now after Friday night’s discussion, paying your dues can mean a few different things to different people, so any productive debate should probably define what it means to pay your dues. It can range from the small, doing some dull work while you get broken into a job, to doing a lifetime of dirty work to get that one job you really want like head of a department or CEO for you big thinkers. Let me be clear that: I’m not talking about the first with my complaints. When you come out of school, move to a new company, or just face any kind of change, there are things you may just have to do in order to grasp enough of the business to be productive. That’s fine, inevitable in most cases, and most importantly for both the individual and the business, short term, and so hopefully less of a pain because of all the other exciting changes going on.

What I’m really against is the perception of paying dues for two or three years at a new place. Sometimes this can strike along greek fraternity like lines of simple institutionalized abuse of power of those below you, but that’s more of the extreme case. The more common situation is a hiring manager assuming that you won’t be worth your salt until you’ve done two years of grunt work. Only then will you have proven yourself, showing that you’re ready for some of the responsibility discussed in the first interview. This is very common, and if you already think I’m off on the wrong foot, then you’re not alone.

The problem is two fold from the manager’s point of view, poor valuation skills of what you’re getting and poor valuation skills of what you’re giving. Now, I will admit that you’ll find plenty of brats that expect more than they deserve, especially after the dot com bubble years, but that’s more the extreme now that the bubble has burst. With the growth of the internet and a growing openness on work related topics in our culture, we’re getting workers who are better educated on their options in the workforce and their own value within the workforce. Additionally, work has become more flexible and mobile, and in the US the shrinking workforce gives those left more leverage than years before.

This leads to the clash of opinions that were thrown around at dinner on Friday. From the company’s position, they’re used to greater leverage and new demands from workers seem abrupt and uncalled for. The change that has been on the horizon, coming closer each day, came slow enough that many are only noticing it now. This natural change is causing a new lack in valuation skills by managers, and with more empowered workers, new demands and work requirements can easily feel like absurd requests. “Where do people get off expecting four to five weeks of vacation from day one?”

However, even with this natural change in environment where you can’t expect employees to stick around for 10 years, if even a full two years now, hiring managers need better and more creative offerings to attract the right employees. The goal isn’t to get an apprentice that you can bring up to speed after years of hard labor, but instead putting a new hire to use as quickly as possible. It’s like going from elementary school class work to college class work. You get assignments, big ones in some cases, from day one. There’s little or no refresher work, nor easing back into school after months of summer. The reality of a ticking clock and required course work isn’t waiting for you to catch up. The same is true for any competitive, well run company, and you probably needed the person last year anyway.

Your goal after getting a person onto the job is giving them as much responsibility as possible in the shortest amount of time. You can’t wait two or three years to see if they’re good enough, and people of any age don’t want to come in and just sit around doing dull work or the work no one else wants to do. So, if you’re getting some uncommon job requests during an interview, don’t be put off. Both parties want a fair value, which is always changing, and new workers want their fair value from day 1, not the promise of fair value on day 730.

Paying dues is the wrong end of the stick for both parties. If you feel like you have to pay due, then maybe you need to go someplace else. If you feel like you need others to pay their dues, then maybe you need to re-educate and pay your own dues. What’s best for both parties is quick productivity that helps each grow. Companies are losing their long held safety net of under appreciating employees by making them pay dues for more reasons than bratty gen X and gen Y employees. Upcoming generations are products of those before them, and their independent, educated, and sure sense of themselves comes from those before them. And much the same as those before, we thirst for the satisfaction of proving our worth. However, that means starting at day 1, not day 730.


“I hit the wall, and it wasn’t pretty. On the way back home from a work trip, I was walking down the aisle of the plane and passed out. Next thing I knew, the plane had landed and I was in a service area off the plane with soiled pants.”

“So, I was sitting next to this guy on the plane that was almost exactly like me – minus a few years. A veteran salesman who travels around for work a lot. High stress job with high demands. He told me his story of hitting the wall, and I know the feeling because I’ve come close myself. I can tell you all of the symptoms. I should teach a seminar on dealing with it.”

“Really you should teach a class on something you can’t fix yourself?” I rhetorically replied.

The above conversation is a shortened version of a story that an older friend told me. We laughed about it at the time (defensive mechanism or something?), but it’s a pretty appalling story. Frankly, anytime a person hits a mental or emotional wall that physically forces them to shut down it’s tragic, and I have a list of friends headed in that direction. Few seem able to stimulate the change needed to correct course, though.

In case you’re wondering what this has to do with financial complexity, I’ve been trying to figure out how to address other issues around the money life cycle beyond just money management issues. It’s easy stressing that single point because it’s so common for so many people, but money management is also almost the least important part. Money management is as much about money as it is change management, and that’s something everyone has problems with, which money can’t inherently fix.

So, this hitting the wall story is pretty bad, especially when your friend can relate so closely to the person telling it. I have mixed feelings about how to react to these situations because I’ve got a specific view that most people don’t care to hear. It seems like most people just like to complain, and prefer ignoring the next step – fixing or improving the situation. I always try and gauge if someone’s open to hearing what I actually think, but I’m hearing complaints so often, I tend not to care anymore.

I’ve got a great life, and a job that I really enjoy. I like to stress living a balanced life, but personally I hope to live an unbalanced one. One that’s unbalanced towards good situations and away from excessive pains. It’s really easy to do actually, but so few people seem to get this. They’re afraid and feel trapped either because they feel limited in options – either not having options or having options that just won’t work. I have a habit of saying that I’m lucky, but that’s bullshit. I’ve planned this – in a way – so I get easily annoyed when others complain because it doesn’t usually take much to improve things, but as I’ve learned, it takes more than just wanting to change.

You can see the wall coming at you and you know that you don’t want to hit it, but then why do you keep working long hours, taking on more work than you should, flying around on errands for you boss, making excuses for why you can’t change? That really sets me off, but I usually (less so each passing day, each passing complaint) hold back my reply because it doesn’t seem to affect people (so I’ll rant a bit on my blog). It feels hypocritical someone telling a person such as myself that you can’t change when I’m a great example of successful change.

As I said, I planned this. I didn’t plan the exact address or complete picture, but I set out with my values and needs, and I found the situation that would fill them. Those adjust with time, so I’m always on the lookout, checking my internal gauges, to make sure I shouldn’t act again. I don’t settle for mediocrity, and that’s easily the biggest mistake that people make. You don’t have to fight the fight in every part of your life, but it’s almost magical how everything falls together when you make sure that you’re at least fighting the important fights and taking on the meaningful challenges.

However, life isn’t a set of challenges and obstacles to outsmart. That’s another thing my friend said when he told me the hitting the wall story. It makes sense coming from him, a person with a special forces military background, that he sees life as being solved by outsmarting it. It just makes me want to scream, “Life isn’t something you can outsmart. Life just is.” You can plan for situations, and adapted to different problems, but life isn’t an obstacle course that’s set against you, which you can then overcome. Shear force – accepting longer work hours, more demanding work situations, or whatever else – doesn’t break you through to the other side. There is no other side, only that which you’re at now and where you’d mentally like to be. More of the same, or less of the good, isn’t outsmarting an obstacle.

Of course, none of this is all that complex. Most people who want to change know what they want to change, but not how. My friend thinks that he can keep from hitting the wall by going to an annual three day decompression camp, but years – decades – of built up stress isn’t solved by decompression camp when you’re that far down the road already. And my other younger friends think they can keep from becoming like the other, but they’re in the same environment, doing the same things, surrounded by the people they hope they won’t become, and assume that time will make things better or that they can just cut of at some point in the future. “Riiiight,” is all I say. That’s why you’re dad and his dad are workaholics.

You have to push yourself beyond the wanting stage. You have to expect better and demand better. If you’re consistent at that, then you escape from life as a set of obstacles and walls to dodge. You move into a state of flow like finding flow on the soccer field or at bat on the baseball diamond.

These changes and improvements will follow you into your money situation. You might not become the richest man alive, but you’re view of what you need and how you’re fulfilled will change, which usually means you’re happier with less because you know the few things that actually matter. So, if you know you want change, but can’t, then figure out what actually matters to you, and if your values don’t match your environment, then you’ve probably got some clues now what needs to change.

mouth covered

Whistler blower wins settlement and gets load of cash, and his friend hops onto the forums asking for advice. I’ve already posted about getting $20,000 and the options that you have, but do things change with a change in magnitude? For most people getting $200,000 is a really big event as $200,000 isn’t an amount the average person is used to dealing with. There’s often a sense that something must be different with this amount of money, and since investing is already a typically misunderstood area, such a windfall can produce a lot of anxiety about the unknown, especially if you get this money at a bad time from a not so great situation.

So, this whistle blower – in what way I don’t know – is looking for some advice and his friend is seeing what he can find. The whistle blower’s situation is a little more complex than just getting a load of cash because he doesn’t have a job anymore, and it could be complicated getting his next job. That in itself could cause plenty of anxiety, and if you’ve got a mortgage and kids in school, then figuring out what to do with a settlement could put a person over the edge. As in any big situation, it’s best to stay calm and have a clear head, don’t rush into any decisions.

The discussion in the forum went as usual. A number of people piped up saying that he should talk to a financial planner. A number of other people said forget the planner, and deal with it himself. Personally, I’m against professionals in this industry, and I’m not a fan of financial planners and such because more often it’s a waste of money as it’s the illusion of complexity that drives people to throw good money at professionals for sub par results – results you will have, but on average they’re not worth the fees. However, piece of mind has a lot of value, and in a situation like this, the extra price for piece of mind could be worth it – knowing, or assuming, that someone else is working in your best interest who also understands the landscape of options.

I don’t see much difference between $20,000 and $200,000. For the whistle blower, he should take out a few months worth of money, so he can pay bills while he’s getting another job, look at reducing his debt, and then invest the rest. What do you invest in? The same things that you’ve always been investing in. $200,000 might cause you to rethink your asset allocation, but it probably won’t do that substantially. If you add in another level of magnitude, $2,000,000, then you’ll want to think about shifting your allocation possibly, but you still have the same investment options (index funds).

The biggest issue with this money is the taxes. The only professionals that I do like (to an extent) are tax agents. The government will definitely want its share of this new money, and the less they take, the more you have. In that case, there might be certain investment options that will shield the new funds from excessive taxes, which is good, but don’t expect any miracles. In the end, you’ll have your share left, and you’ll go about investing like usual with all of the standard implications. If you won’t know what those might be, then drop the cash that you don’t need for bills into a total market index fund, and do some research. Once you know more, move the money as you like, but that doesn’t require a financial planner to take a portion of your money as per their fees – however, a tax agent might be able to save you some money and get them self paid at the same time.

As usual, keeping the equation simple is almost always best. Worst case, you have some non-standard tax options to consider, but that’s about it, and that’s all easily manageable by yourself. As long as you aren’t in a rush to spend the money, it can sit in a nice spot like a total market index fund, and wait for you to do something with it. That leaves you time to deal with the hassles of whatever brought you that money.

sit’n cool

[Disclosure: I received a free copy from the publisher.]

This is a book all investors should own, especially if you’re looking for a place to start learning. If you’ve been a part of the indexer crowd, then it won’t reveal any surprises, but it’s a good quick read at just over 200 pages that re-enforces a basic, simple, common sense understanding of investing. John C. Bogle, founder of Vanguard Group, has written a book that should help beginners see what their options are and how to go about investing, and it should also help anyone experienced with investing, but wanting to understand the enormous advantages of index funds. The one fault I have for this book is that it’s missing a major section of the investing population as it’s written at an audience that already considers themselves investors. Although, it’s probably expecting too much from any book to cover so much ground for such different audiences, so that shouldn’t stop anyone from picking up this little book.

As the book progresses each chapter covers a little more information on investing, but there’s one basic theme throughout all of them – low cost, cap weighted, index funds will provide you with the simplest and most guaranteed return. From the first chapter, which highlights the problems with the current investment industry through a parable about the Gotrocks family (a story adapted from one told by Warren Buffett), to the last, you’ll have a hard time dodging all of the facts thrown at you like balls thrown at a high school principal sitting in the school fair’s dunking booth. Actively managed mutual funds just don’t have a chance, and each chapter makes that more obvious from multiple angles. Again, nothing surprising for anyone who’s studied up on index funds, but it’s nice having that reinforced by John and the many successful investors, professors, and business people that he quotes in the book at the end of each chapter.

All of the praise aside, I’m still waiting for a heavy weight in the industry to reach out to the smart savers. Those people who don’t consider themselves investors as they’re just putting away some money here and there, not watching the market, but still putting a portion into investments in the market like a 401(k) or a Roth IRA. They understand that a return matters, especially compounded return, and that a savings account doesn’t compare to an equity fund. Still, they’re looking for a simple and safe option that lets them step away and concentrate on their life and not day to day market events, which is why index funds are just right.

Both audiences use the same strategies and have the same options (index funds), but they approach the topic from different point of views. Either way both would benefit from reading this book. Showing this is my favorite line from the last chapter, What Should I Do Now?. It’s spot on for this blog as John writes, “You must now be as exhausted as I am by the unremitting pounding of my theme that simplicity is the answer and that complexity simply doesn’t work” (p201) [emphasis added]. After reading through this book and understanding the very basic “arithmetic of investing,” there shouldn’t be much question about the validity and proven success of this simple strategy.

Recommendation: Buy it now.
Pros: Easy and fast read packed with loads of eye opening facts.
Cons: A good starter and intermediate book on investing, but still not aimed at the smart saver. It’s all about investing and money, and nothing about the investment life cycle beyond the investment itself.

* For those looking for even greater insight and a good second phase after you’ve read John Bogle’s book, check out a copy of Richard Ferri’s books, especially All About Asset Allocation or All About Index Funds in the side bar links.