Rich Dad Poor Dad – Robert Kiyosaki

Posts Tagged ‘psychology’

2010 has seen a ton of books released already that I’d love to read, from The Politician by Andrew Young to The Immortal Life of Henrietta Lacks by Rebecca Skloot. (I happen to be passionate about books, of course – perhaps your passion is films or video games or gadgets or music or something else entirely.)

Five years ago, I would have rushed to the bookstore and picked up these titles in hardback. I would have been completely impatient to read them, so I would have just thrown down the $20 or so, picked up the hardback, and headed home with it. About twenty percent of the time, I would have read the book once, stuck it back on a shelf somewhere, and ignored it as it gathered dust. The other eighty percent of the time, I wouldn’t even have read it before it started gathering dust on the shelf.

Why did I do this? There were several factors – I didn’t have the time I wanted to have to read, for one – but the biggest one was what I like to call the “cult of the new.”

Simply put, the “cult of the new” is the willingness to pay a premium price for whatever the newest releases are. When something new comes out, you’re inordinately focused on it because it’s new. It pops up again and again.

If a new restaurant opens, you have to visit it even if the reviews are mediocre.
If a new book or album comes out, you have to pick it up.
If a new car is released, you can’t help but swing by the dealership to scope it out.

It’s a very expensive routine. You constantly overpay for things in terms of their actual quality – instead, you pay a premium for the “new.” You pay new release prices for DVDs and for film tickets. You pay hardcover prices for books. And, in the end, you get far less for your dollar – or you dig yourself into a financial hole.

Some people do it with some level of social justification – they need to keep up with (or keep ahead of) their friends. To them, I say that if your friends value you only because of what’s on your shelves or where you ate last night, there’s not much depth to the friendship.

Others do it to feel good about themselves, so that they feel current. This is perhaps even more dangerous, because you’re tying your self-esteem and happiness to material things and short-term experiences. Without a constant influx of these things, you begin to feel bad about yourself. True self-worth comes from within, not from external things, and it took me a very long (and painful) time to learn that lesson.

It took me years to break out of the “cult of the new.” Here are some of the things that really helped me.

I adopted a firm rule about buying such new things – I don’t. Excepting gifts for others, I simply don’t buy new releases, period. I don’t pick up books for myself until they’re in paperback. If I do happen to read a hardback I like enough to keep around for multiple readings, I still wait until the paperback comes out.

If I truly must read something that’s brand new, I visit the library. I’m a very heavy user of our local library’s book reservation system. Yes, sometimes I don’t get hot new releases in the first month they’re out. However, I do get them eventually and, quite often, I get them faster than I expect (because other readers check them out for much shorter periods than expected). You can do the same thing with movies – sign up early to rent a new release from Netflix, for example.

I also swap frequently with my friends. If I do receive a book as a gift that I think a friend will like, I loan it out. Similarly, they’ll loan their new releases to me. This way, a new release given to me as a gift is often like two or three of them, since I have friends with which I share interests and can trust in terms of swapping books. One’s social network, if filled with compatible, good people, can be a very valuable resource.

I learned to love exploring the archives. If I find an author I like, for example, it’s much cheaper to dig through his or her older books than it is to charge out and buy the new releases. Take Richard Russo, an author I discoverd a few years ago (and subsequently hooked my mother on). Rather than rushing out and buying myself his newest work in hardback, I used PaperBackSwap to read a multitude of his older novels. The cost for these older books was trivial, but I was still able to deeply and fully enjoy his writing without paying that “new” premium. I explored Douglas Coupland in a very similar fashion.

When I finish a book (or a game, or a movie…), I first turn to my own shelves. I don’t insist on finding the thing I want to read/play/listen to already on my shelf, but quite often I find it anyway. I’ll spy a book that just speaks out to me, saying “read me…” in its own special way. So I pick it up and I suddenly have free entertaiment that I’m deeply enjoying.

Some set of these techniques work no matter which form of the new you’re chasing, whether it’s restaurants or trading cards. Whatever it is, if you can seek out other avenues for your passion than the shiny new thing, you’ll almost always receive a big thank you from your wallet.

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The Cult of the New

When I was a child, I went to the store with enough birthday money in my pocket to buy a new game for my Nintendo. After carefully thinking about the options before me, I whittled my choice down to two video game titles: Rampage and Castlevania II: Simon’s Quest. After hemming and hawing until my mother was getting quite frustrated, I finally settled on Rampage.

I took the game home, played it for an hour, and hated it. I mean, hated it. For some reason, the designers of the game made the choice to give all players infinite lives, which essentially meant that you could never lose. There was no real point to the game.

Even though it was obvious I had picked up a very disappointing game, I tried to make myself believe that it was a good choice. I would make regular attempts to play it. I would coerce my friends into playing it until they begged to play anything else. I even went so far as to play the other game I considered (Castlevania II) at my cousin’s house and tell myself that the game was awful, even though I actually liked that one quite a bit.

Although this is a very extreme example, we all do some form of this at various points in our lives. We buy something. It’s not up to the standards we expected at all. Yet, we want to believe that we didn’t waste our resources, so we try to rationalize the purchase.

I have three observations about post-purchase rationalization from my own life.

It happens much more often with impulse buys than with carefully-planned purchases. Let’s roll back to that video game analogy, above. My game purchase was pretty impulsive. I didn’t have access to a wide range of reviews of the two games. In fact, I mostly made the purchase on the spur of the moment. My choice resulted from remembering a fun afternoon at an arcade with my cousin in which we played several games of Rampage together. Today, I make most of my purchases in a vastly different way. I usually research the choices into oblivion. I read reviews. I ask myself if I really need this item and, if I do, whether or not this particular item gives me adequate bang for my buck. That doesn’t mean I’m immune to impulse buys. They strike me still with some regularity, most often in a bookstore or in a grocery store. Sometimes I’ll be happy with my choice; at other times, I’ll read the book or consume the item and feel pretty disappointed.

I often try to forget about those poor purchases. Rather than thinking about them, I usually try to sweep them under the rug. I’ll toss out the remainder of an awful food item just to get it out of my eye. I’ll quickly trade away a disappointing book. My method for “rationalization” of those purchases often comes in the form of simply getting them out of my sight – and thus, often, out of my mind.

When I can’t get rid of the purchase, I usually try to “break” it. I don’t mean that I attempt to smash the item or anything. Instead, I try to use it heavily to force the item to either prove itself or to fail in some distinctive way so that I have a reason to replace it. Think kitchen items, for example; if I buy a knife that doesn’t “click,” I’ll try using it all the time until I discover a true use for it or I discover so many flaws that it’s replace-worthy. In its own way, this is a justification mechanism, as I’m forcing myself to either justify the purchase or justify a replacement for it.

These three observations lead straight to a few solutions to keep post-purchase rationalization from ever becoming an issue.

First, simply curb those impulse buys. Instead, write down the item and research it a bit. If you still want it and can still afford it, buy it later on. Walk away from it, though, if you don’t know anything about it other than what’s on the shiny packaging.

Second, if an item doesn’t work for you, admit it. Don’t try to beat yourself up over it, or stubbornly use it while making a mess of everything else (which can often happen with a kitchen implement, for example). If you made a mistake, admit that you made a mistake. Then, ask yourself how to deal with that mistake.

Finally, once you recognize the mistake, focus on a good solution for it. Can you trade away the item for something you actually will use? Does the item still have resale value? Turn that mistake into something more positive by quickly turning it into some form of a gain in your life. For example, if I read a book I don’t like, I almost always trade it away quickly on PaperBackSwap and then get a book that I will enjoy. This way, I at least wind up getting some value for the money I spent.

Don’t rationalize your mistakes. Instead, face them and look for ways to improve on your choices. A mistake is an opportunity to improve yourself.

Read the original here:
Some Thoughts on Post-Purchase Rationalization

Every other Sunday, The Simple Dollar reviews a book of interest.

Over the last few years, I’ve come to believe that the biggest key to personal finance success is controlling your own psychology and impulses.

Our entire lives are filled with quick decisions we must constantly make – and, for the most part, we’re good at it. We commute to work without getting in an accident. We make constant little decisions at work – and at home, too. We’re able to effectively take several pieces of information, combine them together, and make a pretty good choice based on the result – and we do it over and over again.

Unfortunately, that same ability often doesn’t serve us well at all when it comes to personal finance. The ultra-quick decision making process that leads us to making great little choices in everyday life often leads us to making disastrous financial decisions. Very rarely do snap decisions work out well in the financial world.

This concept is the central focus of Snap Judgment by David Adler. He makes a two-fold argument. First, such snap decisions fail us financially and, if we’re able to get control over them, we’re much more likely to find financial success. Second, understanding how people make such snap decisions can help us to predict and prepare for the choices that other people will make, pushing us to further success.

Sound interesting? Let’s dig in.

I: The Psychology of Financial Decisions
The basic rule of thumb for success in any financial arena is “buy low and sell high.” It rings true in everything from stock investing to grocery shopping. The problem is that most of our normal financial cues tell us to do virtually anything but that. For example, we often believe there must be value to be found if everyone else is buying something, but quite often that means that it’s the opposite of a bargain – the price is overinflated.

Similarly, we are often wired to overlook what we view to be small amounts of risk – if we didn’t, we’d never leave our house in the morning. However, when we apply the same philosophy to investing, we overlook those seemingly small risks and chase what looks like the biggest returns – and then we get bitten by those risks. That’s why so many people got caught losing big chunks of their retirement in 2008?

II: The Track, the Stock Market, and Other Types of Gambling
Our brains are wired to see patterns in our lives, from traffic to grocery shopping to financial markets. Most of the time, when we act based on how we think things will go based on those patterns, we guess right.

The problem is that the stock market and most forms of gambling present false patterns to us, ones that have nothing to do with what happens next. People stare at charts and sit at slot machines because our minds are convinced there’s a pattern in the chaos and that a big winner is about to emerge. Quite often, though, it’s not coming down the pipe.

III: Personal Decisions, Personal Safety, Personal Finance, and Health Choices
Another method in which people falsely assess risk is in our own health and mortality. Many, many people don’t have life insurance because they simply see the risk of their own death as being too minute to really concern themselves with, whether in a conscious or subconscious way. For the same reason, many people don’t bother with annual checkups at the doctor.

In each case, the concern isn’t the chance of the risk, but the severity of the event when risk comes to call. We assess the chances themselves quite well, but we’re poor at assessing the consequences of the bad event actually occuring and whether or not a small cost now is worth covering that big bill later on.

The latter three sections of the book are much shorter and focus on very narrow issues, mostly ones that have really popped up as a result of the 2008 financial crisis.

IV: CEO Behavior
CEOs rise to the top of the corporate ladder by taking risks and having those risks pay off. That’s how a future CEO stands out from the pack – they stick their neck out and succeed. When they get to the top, they often have huge confidence in their abilities, whether it’s warranted (Jack Welch) or not (Bob Nardelli). Often, one sign that a company is either going to succeed wildly or utterly fail is in the behavior of the CEO: are they full of their own hubris? Do they hold onto stock options too long? Good signs include a laserlike focus on their company. Bad signs include self-promotion, like writing books and going on book tours.

V: Psychology and the Credit Crisis
Investment bubbles happen for the reasons outlined above: people see others rushing in and making good money and decide to rush in themselves. Inevitably, though, any market eventually runs out of buyers, at which point the bubble pops and people lose big. The opposite is also true – think of someone shouting “fire” in a theater or a bank run. Quite often, that kind of trampling panic can cause far more damage than is warranted in the situation.

VI: Debiasing
How can you avoid all of this stuff? First of all, slow down. Very few financial decisions have to be made in a “snap” context. Second, communicate. Talk it over with others. Have a “money buddy” or even a group of people to talk decisions through with. Third, cover your risks. Don’t invest in stocks unless you can afford the losses and have insurance unless you’ll be fine without it.

Is Snap Judgment Worth Reading?
Snap Judgment is a thorough and interesting review of how psychology affects investment and financial choices. It’s written approachably and thoughtfully and does a good job of covering the 2008 crisis in the latter sections of the book.

The only real drawback with the book is that the topic area has been covered by a lot of other books, many of which are very, very similar.

If you’ve read a book on financial psychology, Snap Judgment probably isn’t a necessary read, but if you’ve never read one, you ought to, and Snap Judgment is a pretty fine place to start.

Source:
Review: Snap Judgment

Christmas has always been a challenging time of the year for me.

During various years, within a week or two on either side of Christmas, my grandfather (who I cherished) died of cancer, a great uncle that I was very close to also died of cancer, and one of my cousins who was exactly the same age as me committed suicide.

The Christmas season is thus bittersweet for me. There are so many positive feelings and memories I have about this season, but the memories of the final days of loved ones and of funerals and of people I dearly miss also fill the season. There are a few Christmas carols that, when I first hear them during the Christmas season, whack me in the stomach like a two by four.

Because of all of this, I often get really obsessive about trying to ensure that the Christmas season is really great for all of those around me – my parents, my children, my wife. The emotional mix of the Christmas season, for me, often results in me making spending choices that I wouldn’t otherwise make. I’ll choose wonderfully frugal gifts for some people, then I’ll spend far too much on a gift for someone else.

By the time Christmas finally rolls around, I almost feel relieved that it’s all over for another year. I also feel a lot of guilt and shame because I feel as though I spent far too much on gifts for others during the season. By February, I’ve resolved to not do it again this year.

Then November rolls around and the first snow of the year, for some reason, always makes me think of my grandfather. Then I’ll hear Hark! The Herald Angels Sing and the same cycle of feelings always returns.

I think many of us share a lot of conflicting feelings about the holiday season. It’s often an emotionally charged time of the year, with relatives coming together and sometimes exposing very raw nerves. It’s often also connected with a lot of memories of childhood and of people long since past. Add on top of that the fact that December contains the shortest amount of daylight of any month of the year (contributing to a bit of the winter blues in everyone) and it can be a very challenging mix.

For all of us, there are lots of emotional triggers in life (mine just happens to be Christmas). Emotions can flood out from an innocent phrase, the thought of a long lost friend, or any number of other things.

The trick is to remember that when your emotions are running rampant, it is very easy to make very poor choices with your money.

Over the last few years, I’ve really come to recognize how challenging the Christmas season can be for me. The biggest step I’ve taken to keep my finances under control this month is to simply do as much Christmas shopping as I can before the month even begins.

In other words, I do everything I can to separate my wallet from what I know will be an emotional surge for me. I minimize the reasons I might possibly have to go shopping for gifts – and for other things – as the Christmas season approaches, lest I wind up with a pile of poor spending choices brought about by a psychological crest.

What things are hidden in your psychology that cause you to make poor choices? Is it certain people? Is it a certain time of the year? Is it a certain thing? Whatever it is, there are many rewards – financial and otherwise – from stepping back, recognizing that you’re affected strongly by this thing, and doing everything you can to keep your money as far away from the situation as you possibly can.

Yes, it will still be a merry Christmas for me. The light in my children’s eyes helps quite a lot, and it’s a light that I’ve come to learn has little to do with presents or things. It has to do with a dad that lets them pile on in the living room.

Read the original:
Spending Choices and Deeper Psychology

As I sit in my office and look out the window, I can see a number of people and a few pieces of construction equipment busy at work about a quarter of a mile away. It just happens to perfectly line up that I can see the workers if I turn my head to the left from my natural position at work.

At first, the construction somewhat annoyed me. I can hear the construction noises throughout the day as I’m working and they, at times, can be a mild distraction. The workers are also building something that is going to sit right in my view out of my office window.

What are they building, you ask? A house. A very nice house, in fact.

A few days ago, while I was working on an article, I turned my head and watched the construction work for a bit when I suddenly realized something. The house they were building is not too dis-similar from the house I would love to build someday. It’s fairly isolated with plenty of yard space but also with access to the forest. If I understand the floor plan correctly, it has nice, large bedrooms and a nice kitchen, which are the two features I most like in homes.

Since then, whenever I hear that noise, it actually pushes me a little bit. That noise, instead of being an annoyance, is a reminder of my big goals in life. That noise tells me to keep doing what I’m doing, to push forward to big things.

It has been extremely useful to have such a constant motivator around me. It keeps my nose to the grindstone all day long. Whenever I look out the window, I see the work. Whenever I pause for a minute, the noise from the work comes in loud and clear.

In fact, I’m going to dearly miss them when they go away. I’m considering setting up a series of sound files and some desktop wallpaper on my computer to remind me of them when they leave.

This brings me around to my central point: what’s your motivator?

Personal finance success is often borne out of specific, concrete long term goals. For me right now, my biggest goal is a nice home in the country.

Quite often, personal finance mistakes come about when we lose sight of those goals. We place short term wants and desires ahead of these big goals or we simply don’t even think of them when the moment of decision comes.

It’s in those moments that a reminder can really help. For example, if I’m sitting in my office and I get an email from a reader about some great deal they found, I might be tempted to take advantage of it. But all I have to do is open my ears a little bit and that construction noise comes in. That reminds me of my big long-term goal and makes me rethink my purchase.

What’s your motivation? What can you surround yourself with that will remind you of your goals? If you find a visual or audio reminder, here are some places you can put it:
+ on your refrigerator
+ taped to the bottom of the rear-view mirror in your car
+ as your desktop wallpaper
+ as a regular sound on your computer
+ in your wallet, wrapped around your credit card
+ on your bedside table

The key thing is to push your long-term goals so deeply into your thoughts that it becomes wholly natural to consider them before you make any choices. When you do that, you’ll be on the fast track to success.

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Recently, I was reading a great article at The 99 Percent entitled The 40-30-30 Rule: Why Risk Is Worth It. I originally intended to include it in my weekly roundup, but as I thought about the 40-30-30 idea, I found that the connections to careers, personal finance, and life were profound.

What is the 40-30-30 rule? Simply put, it’s an argument that when you prepare for anything in life, only 40% of the preparation is physical – the rest is mental. Thirty percent of preparation is technical skill and experience, and the second thirty percent is the willingness to take risks.

This “rule” comes up again and again in all different areas of life. Here are several examples from my own life where I’ve seen it.

When I’m playing a game I’ve played a lot of times before, I have an intuition as to what move to make next, built from years and years of experience (the 30% that comes from technical skill and experience). However, I also find that it’s very easy to just keep using the same strategy over and over again because I’ve somehow come to the conclusion that it’s the best one. So, if I combine that technical skill and experience with a risky new strategy I’ve devised (the other 30%), I might lose – but I might also devise a way of playing that’s even better.

With investing, I have a good understanding of my own risk tolerance, an understanding built up over a long period of time (the 30% that comes from experience). Howver, I also know that if I don’t push against my risk tolerance a bit and look at new investment opportunities from time to time (the other 30%, risk), I’ll likely miss out on great opportunities.

I also see it in my career, both now and when I worked for a large organization. I would often have a well-worn daily routine that worked and got the things done that I needed to get done (the 30% that comes from experience), but if I really want to excel, I sometimes have to step outside the box a little (the risk-based 30%).

The 40/30/30 rule really does provide a great framework for success, no matter what you do.

Do something worthwhile (the first 40%) means that you’re willing to get up off the couch and do something. Maybe it’s getting ahead in a career. Maybe it’s getting into a new hobby. Maybe it’s simply getting a grip on your investments. 40% of the journey is simply trying.

Keep at it (the next 30%) is simply encouragement to not let a new initiative slide, because the more you work at it, the easier it becomes. Even more important, the more you work at it, the more the basic skills that make up the task begin to become natural to you.

Take risks (the final 30%) simply means to not do things the same way every single time. When you’ve become skilled at something, it’s easy to become wedded to the same routine. Never stop looking at what you do and trying out alternate paths. Not only does this grow your skills (making your basic routine even better), it also helps you to uncover new ways of doing things.

Great… so how do you do this? How can you apply the 40/30/30 rule in your life? The best first step is to figure out the area of your life where you want to improve. Do you want to get out of debt? Do you want to improve your skill at a musical instrument? Do you want to get a promotion at work? Do you want to become a writer?

Once you’ve figured out what you want to do, research it a bit. Figure out what things you’ll need to do to accomplish that goal.

After that, start practicing and building skills. The best way to do that is to start doing the thing you want to master every single day. For me, a thirty day project works well for this. I just commit to doing a certain thing every single day for thirty days (if that’s possible). At the end of it, I’ve usually vastly improved at whatever skill or attribute I was trying to develop.

Quite often, thirty days is enough to establish a positive new routine in your life, so keep it up. Keep doing that thing every day until it becomes truly normal and seemingly effortless.

Then, take a risk. Change what you’re doing a bit. Make it more difficult, or at least different. Explore something new. If you’re taking a walk every day, increase your walking pace a bit and use a stopwatch to slowly trim your time around the block. If you’re trying to break through at work, volunteer for a task that you might have avoided before, like giving a presentation. If you’re playing a game, try a completely different strategy and see how it works. If you’re investing, dig into some new investments that you haven’t looked at before and consider putting some money into them after you’ve studied them.

What you’ll find is that your already-built skill will help carry you through this new challenge and that the rewards of this new risk are great. You end up in better shape, with a better career, with a better gaming experience, and with better investments – or with improvement in anything you’d like to take on in life.

Excerpted from:
The 40/30/30 Rule

I’ve written many, many times about how relevatory keeping a “thought notebook” in my pocket has been for me. Whenever I have a stray thought that might be useful at all to remember later, I jot it down in the notebook and then review it later, usually a couple of reviews a day.

Figuring this out has truly been world-changing to me. It’s helped me to retain good ideas, remember to do certain things, and record data that I’ll need later on (like addresses and phone numbers and such).

One of the big reasons this has been such a step forward for me is that, by default, I have a forgetful mind in terms of short-term things that I need to do. I’m great at remembering long-term things, like the date in 1989 when I had my appendix removed, but short-term things slip my mind all the time if I’m not careful.

Most of the time, such slippage is no big deal, but when it comes to things like remembering to, say, pay the electric bill, it can be a big deal. I have been late on bills before simply because I forgot to pay them – not because I didn’t want to pay them or couldn’t afford to pay them. The same phenomenon holds true for other personal finance tasks, like remembering to rebalance an account or to check on my children’s 529.

Luckily, such incidences are becoming much less frequent as I figure out more and more techniques to keep me from forgetting such things.

Automatic transfers and bill payments have perhaps been the most useful tool for me in this regard. Every payment I have that has a static payment amount – meaning it’s the same every single month – is automated. I also have a number of automatic transfers into multiple savings accounts that are geared for specific goals.

An “inbox” is always in place on my desk. Whenever a new bill or other item to deal with comes in, I put it in that inbox and it stays there until it’s dealt with. I just go through the items in it two or three times a week and deal with what I find there.

A daily “to-do” list posted in several places reminds me of the things I need to do every day – in other words, defining my normal daily routine. I even include such mundane things as my hygiene routine on this list, but it also includes things like daily work tasks. I also have an instance of “check your idea notebook” and other such things on it.

Google Calendar helps me keep my schedule straight. I have monthly reminders of several different bills and other personal finance tasks on there. These calendar entries automatically send me reminder emails as the day gets closer. Beyond that, I also have every birthday and other event that I can possibly need to remember on it – and these also send reminders to me.

A strong mail-handling routine also helps things from falling through the cracks. All mail is collected in a central place in our home (the entryway table) and is processed in a batch once or twice a week, with all junk mail getting tossed and all bills going in my personal inbox. Doing a batch processing of the mail and having a prescribed way to handle all of the pieces keeps individual pieces from falling through the cracks.

The end result of all of this is that I rarely forget important little things. I don’t rely on my brain to keep all of this stuff straight – instead, there’s a “net” of safeguards and systems that help me to not lose anything through the cracks.

Isn’t it all kind of redundant? Yes, in several places in the system, I’ll see multiple reminders of the same thing. It can be kind of annoying to see mentions of my parents’ anniversary in three different areas.

However, such redundancy pretty much ensures that something important won’t slip by unhandled. I’d rather have three notices of my parents’ anniversary and remember it than just one notice and forget it.

If you have as strong a tendency towards short-term forgetfulness as I can have at times, it’s really useful to get a system in place that’s redundant and really easy to maintain. This system works well for me.

Continued here:
The Forgetful Mind

When I first started becoming interested in cooking, I went through a short period where I watched a lot of programming on Food Network. The idea behind it – in my own mind – is that I could learn about cooking through watching and then I could immediately apply it in the kitchen.

What I found is that I would absorb a few good ideas or techniques, but I would have absolutely no desire to go out in the kitchen and actually employ these new ideas and techniques. Instead, I always had this vague sense that I had somehow already accomplished the cooking effort for the day, so instead I would prepare something incredibly easy and call it good enough.

My only success, in fact, came when I would actually be in the kitchen preparing the meal at the same time as the hosts. I would do this by using the DVR, pausing when I needed to. If I didn’t do that, I usually wouldn’t bother. Not always – there were rare exceptions to this – but usually.

What I found instead is that if I actually wanted to prepare a meal in the kitchen, I was a lot better off reading about the technique and visualizing myself doing it. If I had no idea, I could always watch a YouTube video, but usually a passage from a technique-heavy cookbook like Joy of Cooking and some imagination would do the trick.

I never really thought about this again until recently, when I had a long chat with a guy who has a side business revolving around home repair and remodeling. He related a very similar experience to my own. Whenever he’d catch a show or two of a program like This Old House, his motivation to actually get out and do something went straight downhill.

What do these two experiences have in common? After watching someone else accomplish something, we felt much less compelled to go out and accomplish the same thing ourselves and, often, felt a subtle sense of having actually accomplished something merely by watching someone else do it.

There’s a biological explanation for this: mirror neurons.

Mirror neurons are neurons (i.e., pieces of the brain) that fire both when a person acts and when a person observes the same action performed by another. In other words, parts of our brain respond exactly the same when we do something or when we watch someone else do that same exact thing. Like, for example, preparing a meal or watching Paula Deen prepare one, or do a home repair project or watch Bob Vila do that same project.

To put it simply, we often get the same feeling from watching someone else do something that we would get from doing things ourselves.

When you think about it this way, it pops up time and time again in our lives. We feel happy when we read about someone else experiencing happiness and sad when they experience sadness. We feel a sense of accomplishment and joy when the hero overcomes adversity. We feel fear when the monster is sneaking up behind the hero on screen, even though there’s no monster in the room with us.

And, quite often, those emotional rushes are enough to fulfill us, reducing our drive to actually accomplish things.

Let me put it as simply as I can. If you want to succeed, do. If you want to follow, watch.

After a period of watching a lot of Food Network shows, I began to realize that I wasn’t actually becoming a better cook or, frankly, cooking much of anything at all. Instead, I began to read a lot more about cooking, often in the kitchen with the book open in front of me as I mixed something up and threw it in the oven.

The same phenomenon repeated itself when I dug deep into my own personal finance recovery. I would read lots of tips and often feel a strong sense that my finances were already in better shape because I had read it. It was only by continually pushing myself that I was able to actually improve my financial life, not just rely on mirror neurons to give me a sense that it was improving.

Watching and reading about someone else’s success is a great starting point for your own success. But that’s all it is, a starting point. It’s up to you to take the next step and actually do something. Don’t trick yourself into a false sense of accomplishment just because you watched someone else succeed with these tactics.

What are you going to do today?

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For me, September is the unhappiest month of the year.

Sarah, after being off all summer, returns to work at the end of August, leaving me alone at home many days with my thoughts and my work. This also means that the children’s daycare attendance increases as well.

The house goes from noisy and happy to empty and quiet. Even as I attempt to fill it with music and NPR, it still feels somehow vacant and still. The liveliness is gone – no more children’s laughter floating up the stairs to cheer me while I’m working and no more occasional interruptions by Sarah just to let me know she’s thinking of me.

Unsurprisingly, my mood slips a little bit. I tend to get more caught up in details – and I also have a greater tendency to get distracted.

Perhaps most worrying is that I have a greater tendency to spend without really thinking about it. It’s the old “comfort” thing – I’m unhappy with the way things are, but if I buy something, I’ll feel better about it.

Over the past few weeks, that feeling has manifested itself several times. I bought a few books and a couple board games that I would have never bought.

On Monday, it manifested itself incredibly clearly, in a way that almost shocked me. My kids both needed some new socks and perhaps a few new pairs of pants, as fall is coming on and their supply of well-fitting long pants is pretty small. Buying the socks and pants wasn’t the problem, though.

After I left the store, I stopped by a gaming shop on a pure impulse. I was just walking past it and it crossed my mind to stop in and say hello to one of the employees that I knew.

Almost before I thought about it, I left with a game under my arm.

Many people might say, “So what?” I don’t buy myself many items. The few things I do buy myself are bargain-shopped to death. So why not live a little?

Here’s the problem: the game doesn’t solve the problem that is making me unhappy – in fact, it just makes it a little worse.

The piece of my situation that makes me unhappy is not seeing my wife and children as much as I’d like. I love spending time with them and, after spending so much time together with them all summer long, I miss them.

Buying a game is a short term panacea – it might bring me a fleeting sense of enjoyment, but in the long run, I could have easily just played one of the other games in our board game collection in the basement closet.

I know what the solution to that problem is. If I keep my nose to the grindstone each day, I can take more time off and go do fun things with my children. If I take advantage of the writing and presentation opportunities I have, perhaps my wife can take a year or two off from her job while the children are young (I know quite well that she’s doing the work she loves and that she simply wouldn’t permanently choose not to do it). If I’m careful with my spending, I can open the door to some amazing experiences in my children’s future.

If I had chosen not to spend the $30 on the game, I could have tossed that money into a savings account. If I had simply chosen not to wander into that store, I would have had an extra hour to focus on finishing up my book or writing a stellar article.

It’s easy to say that I’m being too hard on myself. On the other hand, if I don’t keep an eye on the little choices, the big dreams start to float away.

In the end, the truth is simple: if you’re buying things to console yourself, ask yourself if that purchase is really going to solve your problem. Is buying a new video game going to make it easier for you to interact with people socially? Is buying a new wardrobe going to help you get into better shape? Is restocking your liquor cabinet going to make it easier to actually invite people over? is buying a new car going to help you get a date?

The answer to each of these things is “no.” The solution to these problems doesn’t come from buying things. They come from making authentic changes in your life – how you interact with others, how you work, and how you take care of yourself. They might put a little bit of grease on the skids, but if you can’t get the engine moving forward on your own, all the grease in the world won’t make a difference – and you’ll find, in the end, that you wasted a lot of time and money and energy on that useless grease.

Put your wallet back in your pocket and ask yourself one thing: what is it that you really want? The more of your energy you put towards that real goal, the better off you’ll feel about yourself over the long haul.

(The Simple Dollar podcast is on a one (or possibly two) week hiatus while I finish my book. It’ll return to your Tuesday afternoons shortly.)

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Some Thoughts on Moods and Spending

I’m often tempted to spend money that I shouldn’t.

I’m good at restraining my impulsive nature. I don’t simply go into stores and then emerge later with a hefty bag, a credit card bill, and a dazed look on my face. Still, in certain places, I am strongly tempted to spend. I look around and see tons of items that I’d like to have. Here are seven places that really fuel my spending desires.

Bookstores What can I say? I love to read – I read about ten books a month for my own enjoyment and probably five more for The Simple Dollar and other professional purposes. The smell and feel and sight of a new book is like manna to me. I usually resist most of my impulses by arguing to myself that I can get those books at the library or off of PaperBackSwap, but it’s definitely a struggle – one I don’t always win.

Williams-Sonoma As I get more and more adept in the kitchen, I’m slowly upgrading my kitchen equipment to superior versions of the cheap (and sometimes problematic) equipment I have on hand. Williams-Sonoma does an extremely good job of convincing me to accelerate this upgrade process, enticing me with better knives, a wide array of very nice pots and pans, and lots of other items.

Wineries If I stop at a winery and enjoy a tasting, I usually wind up buying at least a bottle. There’s something about the atmosphere of a winery that gets me into the right mindset, and adding onto that is the fact that I truly enjoy a glass of a distinctive wine, it’s unsurprising that I often leave wineries with a bottle or two in my bag.

Food co-ops Stores that put obvious care into their food selection often entice me to be much more willing to buy foods impulsively. At regular grocery stores, I usually avoid impulsive food purchases by knowing that the item is usually going to be full of ingredients I shouldn’t be eating or won’t taste all that good. At a food co-op, that’s often not the case at all – and thus I’ll find myself picking up items like feta made from sheep’s milk.

Gaming shops I love playing games against family and friends and gaming shops tend to bring out my strongest tendencies. I particularly like board games, and if I witness a game demonstration and the game seems fun at all, I’ll often be very tempted to talk myself into buying it.

Art supply stores My biggest weaknesses in art supply stores usually come down to notebooks/sketch books and writing implements. I can easily fill up notebooks with jotted notes, quotes, ideas, and other things, and the feel of a good pen in my hand is almost intoxicating and actually does a good job of fueling my writing tendencies.

The Apple Store I usually don’t buy anything at Apple Stores. Instead, they just do a great job of convincing me to save up and spend much more than I should to buy a MacBook Pro or a new desktop machine or an iPod Touch. Apple puts a lot of care into the little details of their devices and, after spending a lot of time using them, I’ve come to really miss them when I use other devices.

There, my confessions. Putting them all down on paper like that is fairly refreshing for me, as it helps me to realize that I use quite a few different techniques to minimize the temptation to spend in those places. I’ve mentioned some of these tactics before in various other articles, of course, but here are eight different tactics that I use to minimize the negative influence that these tempting places have on my wallet.

Avoid them entirely. The easiest way not to be tempted is to simply not visit these stores at all. This works to a certain extent. For years, I had a routine of going to a bookstore each Tuesday (to check out the new releases) and each Friday (to “celebrate” the end of a workweek). This routine usually meant that I would wind up buying a book or two at each visit, which could easily add up to $40 a week.

By simply breaking that routine, it was easy to see a tremendous amount of financial benefit – as much as $2,000 per year. While I still do visit bookstores on occasion, they’re no longer part of any sort of routine. This makes the individual visits much more enjoying, since they’re more infrequent and not based on any sort of schedule.

Take notes. If you visit a store, fall in love with lots of items, and are tempted to buy, stop. Pull out a notepad and write down all of the things that are tempting you. List the books, food ideas, clothing, games, or other items that are really intriguing you.

This serves two purposes. First, you can take the list home and do further research on the item(s) and some comparison shopping. Second, it allows you to utilize the “thirty day rule,” where you agree not to buy the item for thirty days and then re-evaluate at the end of the period whether or not you actually want the item.

Go with only cash. If you visit a place with such obvious temptations, leave your wallet behind. Just take in a small amount of cash, whatever you’re completely comfortable with spending there and won’t feel guilty about afterwards. So, if you’re going to a bookstore, take a $20 bill. This allows you to splurge a little, but prevents you from spending more than you should.

The real key here is to not bring in plastic, which effectively gives you access to far more money that you might otherwise have. Without strong willpower, credit cards can be a real danger, so it can be good to avoid them until you do have the personal fortitude to avoid over-the-top spending with them.

Go with the right kind of friend. Some friends encourage you to spend. They talk up the items they see, complement you on your choices and taste, and encourage you to splurge a little. Those kinds of friends will almost always cause you to have a bigger bill than you want.

I prefer shopping with either my wife or my closest friend, John. Neither one of them encourages me to spend more than I should. My wife usually makes no comment whatsoever if I choose to make a purchase. John usually just criticizes items in a humorous way, making them seem less appealing while also being entertaining. The end result? I buy less than I would if I were there with a heavy-spending friend.

Set an explicit budget. Each month, I allot myself a certain amount of money to spend on whatever I wish. Since I plan for it, I can spend that money without guilt, and this money is often spent at the places I described above.

Since I know what that limit is, I can spend up to that limit without any sort of guilt whatsoever. If I’m at Williams-Sonoma and see an item that costs two or three months’ worth of free money, I’m patient with it. I’ll wait two months without spending much “mad money,” then pick up that item without any guilt at all.

This is perhaps my most-used technique, and my wife uses it as well.

Use the ten second rule. Sometimes, on an impulsive whim, you’ll pick up an item and make the split-second decision to buy it. As you head to the cashier, stop for ten seconds and ask yourself if you really need this item after all, or if you couldn’t get a better deal on it elsewhere.

For me, this works quite well to at least slow impulse buys. I’ll usually put the item back and add it to my list (see the earlier tip). It doesn’t necessarily mean that I won’t end up with the item in the future, but it will be bought with a rational, not an impulsive, mind.

Never go without a purpose. And, no, social engagements aren’t a purpose.

Why are you shopping? If you’re doing it just to spend time with a friend – or even mostly to spend time with a friend – your wallet will thank you if you find something else to do. Why not go through the stuff you already have? Why not spend time in a public place that’s not designed to convince you to spend money?

If you actually do go shopping somewhere, particularly in places that you know tempt you to spend money, make sure you’re going with a specific purpose. There’s a book you want to pick up. There’s a French oven you want to look at. You have some technical questions about your MacBook. You get the idea.

Find a substitute. Remember above, when I mentioned that I’d buy three or four books a week at the bookstore? Sure, I did read most of these books, but very rarely more than once. So, why not use the library?

Most of the big temptations above have great substitutes for me. Instead of going to game stores (usually to talk and browse games), I visit a few community gaming websites to get most of the same effect. Instead of hitting food stores, I use farmers markets for the same effects. This helps me stay away from many of my worst temptations.

What places tempt you the most? And what techniques do you use to control your spending there?

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If you’ve read The Simple Dollar for long, you’ve seen tons of lists of money-saving tips, from 100 little steps for saving money and 100 free things to do this weekend to fifty ways to have fun by yourself on the cheap and my frugal vacation guide to Dallas/Fort Worth, just to name a few.

A few days ago, an old friend of mine wrote to me about The Simple Dollar. She’d been reading the archives for a while and had finally caught up with the most recent posts. One of her comments was quite interesting and worth discussing:

The articles I didn’t like were when you listed tips for cutting your spending. Most of them are just simply outside the realm of possibility. Most people don’t want to do a bunch of extra work or do something really unenjoyable or ruin something fun just to save a few bucks.

Her example actually revolved around a tip she found on the site where I suggested making sandwiches on vacations instead of eating out for every meal:

I’m on vacation to have fun. Eating a “sandwich” that consists of some awful lunchmeat jammed between two pieces of dry bread does not equal fun. I just simply won’t do it, and most people won’t, either.

Since I couldn’t find the tip she mentioned after searching for an hour, I’ll explain it in more detail in a “mini-post” right now – two posts in one!

A Frugal Vacation Tip From My Childhood
We rarely went on vacations when I was a child. The only true vacation that we went on before I was in high school – meaning a trip that wasn’t either camping within 50 miles of home or visiting relatives – was a trip to Saint Louis in 1986 with my parents, one of my brothers, and one of my cousins.

We didn’t have a huge budget for the five day trip, so my parents used several techniques to save money. My father got discount Six Flags and baseball tickets through his credit union in some sort of package deal. All five of us shared a single room with one large bed, leaving us three kids to sleep on the floor. At least two of the days, we didn’t do anything at all – instead, we either just stayed at the hotel in the pool much of the day or wandered around Saint Louis near our hotel, exploring.

But one big trick that my parents used on this trip was to eat sandwiches for every lunch on the trip. The day before we left, my parents bought several loaves of bread, some cheese, and some bologna from a local deli counter, along with some condiments and chips. Each day for lunch, we’d either gather in the hotel room and make sandwiches at lunch time or we’d pack a lunch in the morning and eat it when we were out and about.

We plowed through several loaves of bread, a few packages of bologna, a few packages of cheese, and a bottle of ketchup and mustard, but the total cost of the food was less than $15 – and it provided five lunches for five people. Compare that to the cost of eating out … anything. It was a huge savings – it likely amounted to getting our hotel room for free.

Since then, I’ve been a big believer of making picnic lunches while traveling whenever there’s a reasonable opportunity to do so. Often, on long road trips, we’ll stop at an exit and instead of hitting a restaurant, we’ll stop at a park, pop open the back, and dig into the sandwiches we packed – or stop at a grocery store, pick up a loaf of bread and a few other items, and head to a park to make our own sandwiches (and save the inevitable left over bread).

It’s cheaper and healthier and almost as fast as the other options.

So, here we have it. I like to make my own sandwiches for lunches on road trips and vacations, but my friend comments that such tactics are “outside the realm of possibility” as it degrades the quality of the vacation just to save a few bucks.

This type of phenomenon pops up time and time again. It might be “outside the realm of possibility” to pry that morning coffee from your hands. It might be “outside the realm of possibility” to drive a ten year old car (my truck is thirteen years old! I must be a loser!). It might be “outside the realm of possibility” to make your own laundry detergent. You wouldn’t even think of doing such things.

But why?

Here’s the way I look at the world. If something has an obvious benefit, I’ll consider it instead of brushing it off immediately. Most money-saving tactics fall straight into this category – so, in this example, the obvious benefit of making such sandwiches is that they’re healthier than fast food and quite a bit cheaper.

The obvious benefit of trimming out a morning coffee is that you save $5 every morning and break a caffeine addiction.

The obvious benefit of driving an old vehicle is that you’re not spending money on a new car payment.

The obvious benefit of making your own laundry detergent is that your detergent is about 1/10th the cost of detergent bought at the store.

Thus, I’m willing to at least consider most frugal tactics – I don’t immediately rule them as being outside the realm of possibility.

Obviously, each of these options has some sort of cost.

A sandwich on a trip is likely not going to be quite as tasty as going to a restaurant, and you’ll likely be eating in a park instead of a restaurant (with kids, this latter part is an advantage, but it might not be for others).

Trimming your morning coffee means that you’re either drinking lower quality coffee or you’re giving it up entirely. Maybe you can just move from the Starbucks routine to making your own (a big savings right there) or just try different brands to find one that suits you (for example, my wife reports that Eight O’Clock Coffee is the best bang for the buck out there).

An old vehicle is somewhat less reliable and likely gets worse gas mileage. These two factors pushed us to upgrade our car earlier this year, moving from a 1999 Mercury Sable with a failing transmission and about 24 MPG to a 2009 Toyota Prius that gets 46 MPG. We debated the upgrade for the better part of a year.

Making your own laundry detergent takes about fifteen minutes, so it’s really a factor of how you value your free time in the evenings or on weekends.

In some cases, I’ll go for it – I’m still driving my old rust-bucket truck, I make my own laundry detergent, I make sandwiches on the road, and I don’t drink coffee anymore at all (aside from a once-a-month or so treat).

Others might balk at one or more of those choices, choosing to stick with what they’re already doing or a more expensive route. I do this with many food choices – I’ll buy eggs from a local farmer at a premium, for example.

That’s fine – it’s all about personal value. What’s dangerous is not even considering such options and immediately ruling them out of the realm of possibility. There are a lot of reasons for this, but I think it comes down to one thing: fear of change.

Frugal choices often require doing things differently than you did before. For some, the thought of changing their routine – even if there’s an obvious net benefit – is bad. This can affect every aspect of one’s life.

Here’s a great example of how powerful routine can be. Once a year, my wife and I spend a day with two of our friends that live about six hours away. It’s usually a “weekend getaway” for them that we interrupt for an afternoon or so. Every single year, though, the two of them choose to go to the same place. They stay in the same hotel. They go to many of the same places. Earlier this year, when we met up, I asked them why. They both shrugged their shoulders and then suggested it was because it was familiar – it fit like an old glove. Choosing something different would just seem… wrong.

The next time you outright reject a frugal choice, ask yourself whether you’re rejecting that frugal choice for a good reason or you’re rejecting it because it would mean you’d have to change a comfortable behavior. Quite often, stepping outside a comfortable behavior can offer huge benefits, not only in the immediate choice, but in that it makes you more flexible and open to other little choices.

Making your own laundry detergent or your own sandwiches on the road isn’t outside the realm of possibility, after all.

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About a week ago, J.D. over at Get Rich Slowly posted an article about the difference between high income earners and low income earners. Most of the differences between the two that he listed come largely down to personal effort and personal choices.

In the comments, many people jumped to the conclusion that “poor people are lazy,” which is an extremely broad brush, but a fairly reasonable one. After all, if the difference between high incomes and low incomes is a handful of personal choices and actions, the people not taking them – the people with low incomes – must be lazy, right?

To an extent, I agree. Some poor people are lazy. But so are some rich people. Let’s dig into this a little more.

The Nature of Luck
Let’s take a look at that list of traits that J.D. pointed out:

* They maintain a strong work ethic.
* They don’t watch the clock.
* They seek to improve their skills.
* They do quality work.
* They’re flexible and adaptable.
* They maintain a good social network.
* They possess self-confidence.

Most of the time, opportunities and career paths that lead to a high income are purely a matter of luck. Some people do get all the breaks – others simply don’t.

Luck is about being in the right place at the right time with the right people and the right skills and the right information. If you can be there, opportunities open for you – if you can’t, opportunities will pass you by.

Those traits listed above simply increase your odds of luck. Doing them increases your chances of being in the right place at the right time with the right people and the right skills and the right information.

But great opportunities regularly happen to people who don’t do any of these things. The child of a successful businessman can be lazy and unmotivated, but he gets his foot in the door because of his father. A random joe happens to be standing nearby when someone really needs help in a pinch.

At the same time, you can do all of these things and the opportunities don’t unfold. They help build a business that’s later destroyed by a poor manager. They get sick the night before a big opportunity comes along. They make a bad choice or two when they’re young that haunts them for the rest of their lives.

Poverty and Luck
Here’s the problem, though. Building the traits above takes time. You have to invest time in building a good social network. You have to invest time in quality work. You have to invest time in building skills.

Quite often, in order to have the free time that’s needed to build these things, you need to have a strong, stable income. If you’re currently working a minimum wage job and supporting other people, you’re likely working two or three jobs and you simply don’t have the time to develop these things.

In other words, luck is amplified. Someone who gets a great opportunity due to sheer luck is often able to build up traits that lead to further luck. Someone who doesn’t get that opportunity is often restricted in their ability to build up those traits.

While laziness is indeed a factor in all of this – since lazy people won’t bother to put in the work to build up these traits – luck is another huge factor. A rich person you know may have had a great opportunity or two early on, while another person does not. A poor person might have made a bad choice thirty five years ago that they’re still affected by.

What’s the Solution?
The solution is pretty straightforward – live as cheaply as you can and use your spare time to improve yourself.

Instead of buying a case of beer and watching the ball game, drink some water and work on your skills.

Instead of dropping several hundred dollars on hunting equipment and heading out in the woods every weekend with your buddies, dump that money into weekend classes at the local community college.

Instead of cruising for an hour or two before work, go have lunch with someone up the food chain from yourself and ask for advice.

Instead of doing the minimum at work, go the extra mile when you can, especially when it makes everyone’s lives easier.

Instead of buying gadgets and other toys to “escape” from your situation, put that money in the bank and use it to pay cash for your next vehicle, gradually snowballing your positive financial state.

Keep making these little choices all over your life – and these are choices you can make no matter what your situation – and you’ll find, over time, that those lucky opportunities slowly start unfolding for you.

Fortune favors the prepared. Preparation requires work. So, if you want fortune to favor you, you can’t be lazy.

Poor people aren’t lazy, but lazy people are often poor.

Read more from the original source:
Are Poor People Lazy?

Tom left a great comment on the recent article about taking care of your things:

How can you fight off “I’ll do it tomorrow”-ness? My lack of motivation makes me lazy, even though I see the benefits of not being like this.

Procrastination is a big enemy of financial progress. It’s easy to say “I’ll do it tomorrow” about countless maintenance, frugality, and money management tasks. I do it all the time myself, and I’m one of the more proactive people I know.

How do you get around it? How can you make yourself do all of the “important but not urgent” things you need to get done in your life, when it’s so easy to put them off and just kick back?

Here are the tactics I personally use to make it happen.

I don’t overwhelm myself with a to-do list. If you sat down and made a list of all of the little “important but not urgent” things that you need to do in your life, you’d have a monstrous list.

Give it a try right now in your head for the next minute. Just go through your life and think of all of the stuff that you’d like to get done – that’s important to get done – but it’s not urgent. The books and articles you’d like to read. The home and auto maintenance you’d like to get done. The financial tasks you ought to take care of. The people you should get in touch with.

The list will be painfully huge, and it’ll probably seem overwhelming.

Instead, I make a short list each day. Instead of deciding that list is overwhelming, I break it down. I tackle two or three or four of the items on that list every day.

Which ones? If they’re all important and not urgent, it doesn’t matter – I just tackle whatever’s at the top of the list. Sometimes, though, one item or another does take precedence – it’s something that needs to be done regularly.

In that case…

I use Google Calendar to plan the daily list in advance. I just add an all day event for a task that needs to be done and drag it around to whatever day I want to do it. If I have a thing I’d like to do, I just scroll ahead several days and stick it in on the first day that doesn’t have much going on.

The big advantage here is that it allows me to set up recurring events, for things like regular auto or home maintenance or health tasks like setting up a dentist appointment. These automatically appear in place on the day I ought to do them, so I can easily just shuffle stuff around it.

When that daily list is finished, I can kick back without guilt. So, each day I have three or four “important but not urgent” tasks that I should get done – an amount that isn’t overwhelming. I can get through them in a half an hour or an hour or so.

Once they’re done, I’m done. Sure, I have other “important but not urgent” tasks I should get to, but that’s what future days are for. I’ve taken care of what I’ve assigned myself today (which isn’t overwhelming), so I can kick back and play with my kids without feeling I’m letting something down. I know it’s all in place.

If it’s a big task, I break it down into little pieces. Big tasks are easy to postpone, so I break them down. I don’t have a task like “clean the house” or even “clean the office.” It’ll be something simple like “go through the bookshelf in my office.” I don’t do things like “fix my relationship with person X,” I instead do something like “write person X an email” or “give person X a phone call.”

Usually, at the end of such a task that’s just one part of a bigger puzzle, I immediately record the next step that needs to be done as another task. I fire up Google Calendar and jot it down immediately, putting it in place.

I keep a notepad and pen with me so I don’t forget those “important but not urgent” tasks when they come to me. “Important but not urgent” tasks pop into my head all the time. I just keep a notepad with me to jot them down as they come to mind. Once a day or so, I go through the things in my notepad and make sure they’re handled.

Sometimes, I’ll just do those things immediately. Other times, I’ll just toss it up on my calendar, adding another thing that needs to get done.

Always remember that procrastination is the mortal enemy of all of the “important but not urgent” things in your life, and often it’s those things that separate the people who get things done and succeed from those who fall behind.

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Recently, a brilliant little article popped up over at Five Cent Nickel, outlining the idea that one’s take on long-term investment performance is often a matter of perspective.

I go even further: almost every assumption that you base your money decisions – and even your other life decisions – on is a matter of perspective.

Take me. I was born in the country on the banks of the Mississippi River in a quiet region of the Midwest. I graduated in a high school class of 31 people (several of whom now read The Simple Dollar, apparently). I went to a big university (Iowa State U.) where I graduated in a class of several thousand. I’ve worked for businesses. I’ve worked for governments. I’ve worked for myself. I’m married and have children. After living in a city, I now live on the very periphery of a small town and I dream of living in the country once again.

All of these aspects of my life have shaded my perspective time and time again. Let me walk through some examples.

My childhood taught me it was better to be earnest. To put it simply, I tend towards the serious. I often take people at their word, sometimes even when they’re joking.

My childhood also taught me that not having money doesn’t mean you’re stupid or worthless. Many, many people with substantial money seem to act as though people without money are rubes. That’s simply not the case – there are intelligent, well-intentioned, hard-working people at all levels of financial status.

My educational history taught me that there are many different ways to learn. Not everything about an educational experience can be measured, and a school with tons of opportunities can fail a student just as much as a school with few opportunities. It’s up to the student to be successful – a forward-thinking kid can take advantage of any situation.

My educational history also taught me that tests don’t mean much of anything. I was a National Merit Scholar who proceeded to almost flunk out of college at first because I had no idea whatsoever how to study. I spent my childhood just absorbing whatever interested me, which was great for the SAT and high school but terrible for college. I looked great on the SAT, but in a classroom where I didn’t know the material and didn’t care, I floundered big time.

My work career taught me that stability isn’t everything. If you’re in a stable career, you’re often surrounded by complacent people, which makes it difficult to get things done and exciting projects are hard to come by.

My history with investing pushes me towards being conservative. I’ve seen the dot-com bust and the housing bust. Don’t rely on the stock market for anything you’ll need long term. If you need that balance, it shouldn’t be in stocks.

All of the experiences in my life have gelled together to create my perspective on the world. I tend to think that taking someone at their word is usually the right way to go. I tend to overestimate the reliability of jobs – and sometimes overcompensate for that. I tend to underestimate the reliability of the stock market. I tend to not buy into the whole pressurized SAT/ACT/college application experience that high school seems to be. I tend to, if anything, be biased against people who dress in expensive clothes and drive expensive cars.

My life experience has created my perspective on the world. It pushes me subtly towards conservative investing choices. It pushes me towards being a locavore (eating locally grown foods). It pushes me towards being earnest, serious, and forthright with others much of the time. It pushes me towards chasing my dreams instead of seeking the good-paying stable job.

It’s different than your perspective. Your life has taught you different lessons than mine. The things you choose to apply in your life are different than what I choose to apply, and they get different results.

I can’t provide all the answers. No one can. The best I can do is provide my answers and leave the comments open for others to provide theirs. Out of that, perhaps, you can find the direction you need to grow and move onwards.

Quite often, I get emails from people saying “I love The Simple Dollar. I don’t always agree with what you say, but I read it every day and it makes me think.” or something similar. I’d far rather read that than someone saying “Trent, you’re always right.”

Because I’m not even right in my own life much of the time, and I’m certainly not going to be right in your life, either. All I can do is bring my perspective to the table and hope that, when we share ideas, you bring your perspective, too.

Whenever you read something or hear something that you think is wrong, stop and ask yourself this: why is it wrong? The more often you can come up with a real answer for that, the better off you’ll always be in every aspect of your life, financial or otherwise.

Tell me about it. What aspect of your life has given you a perspective different than mine?

Continued here:
Perspective

Every other Sunday, The Simple Dollar reviews a personal finance book.

Lately, there have been a ton of good books targeting people in their twenties with a burgeoning interest in personal finance, from Dara Duguay’s revised Please Send Money (targeting college students) to Ramit Sethi’s I Will Teach You to Be Rich (targeting young professional males) to Farnoosh Torabi’s You’re So Money (targeting young professional females) and Michael Masterson’s Automatic Wealth for Grads (targeting young adults with entrepreneurial bents), among many others (check those links – they go straight to my detailed reviews of each book).

So what niche could Beth Kobliner’s Get a Financial Life target? After all, the cover broadcasts the clear subtitle Personal Finance in Your Twenties and Thirties.

The answer’s pretty straightforward: Get a Financial Life focuses pretty directly on the more analytical folks in that age group, the ones who want the facts and want to draw their own conclusions from them. There’s not a lot of attitude or fluff, just a lot of good information compressed into a tight package. If that appeals to you (and you’re in the target age range – twenties and thirties), Get a Financial Life is probably right up your alley.

Let’s dig in.

Get a Grip on Your Financial Life
It all starts with goals. We all have them, but many of us leave our goals in a very unspecific state – at which point they’re more dreams than goals. Make them specific. Kobliner’s recommendation is to assign them numbers – what will they really cost? Once you have those numbers, they move from being dreams to being savings targets.

Next, figure out where your money is going. Keep track of your spending for at least a month (two or three is better) and figure out how much you’re really spending each month. The big focus is figuring out how much you really spend in an unnecessary fashion and cutting it (not eliminating it). You want to leave the non-essential spending that’s really valuable to you and get rid of the ho-hum stuff, directing that cash towards your goals.

Dealing with Debt
Kobliner outlines some of the issues of dealing with debt, but doesn’t really get into a debt repayment plan, probably under the assumption that readers won’t be in too much debt. I’m not sure if I agree with that, but most of the other advice is useful, particularly the details on student loans.

Kobliner does devote several pages to car leases, which is pretty interesting. Car leases are mostly there for people who are willing to pay to essentially rent a new car. The only problem with that is if you compare the costs of that to driving a car up to a healthy mileage (say, 150,000 miles), leases almost always lose out. The cost of actually buying a car may be more, but the many years you can go without a car payment if you drive a car to the problematic stage more than make up for it. If you’re addicted to a shiny new car and have a trust fund, a lease might be a good choice – otherwise, it’s probably not worth the effort.

Basic Banking
The big message here is that it’s well worth your time to shop around for a bank that treats you well. A good bank should have no fees – no maintenance fees, a huge ATM network without fees, no fees for online banking, or anything else – and great customer service. The time investment you put into finding a bank with these attributes will be recouped over the long run.

So how do you find such a bank? Start Googling for bank recommendations. Use Bankrate.com. Ask people you know and trust what banks they use and whether they like them. I use ING Direct for everything and I’m quite happy with them.

All You Really Need to Know About Investing
What do you do when your debt is under control and you’re bringing in a surplus? First step: build up a cash emergency fund equal to a bare minimum of three months’ worth of living expenses, and keep it in a high-interest savings account or a money market account. Second step: begin investing in stocks and bonds.

Kobliner points towards using mutual funds to balance out your risks. That’s fine, but if you’re doing that, seek out index funds – they’re extremely low cost and provide tons of diversification.

The Brave New World of 401(k)s
What about saving for retirement? The big key is to get started now – don’t put it off. The money you put away now is much more valuable than the money you might put away later because you have more years for the power of compound interest to work for you. A stock bought today has more years to pay you dividends than a stock bought in ten years.

Kobliner strongly encourages people to sign up for a 401(k)/403(b) at their place of employment and get any matching funds that their employer provides. Doing that today means you not only get the advantage of compound interest, but you also get 50% or 100% more for free right off the bat, regardless of what the market does.

Once you’re past the level of matching and still want to save more, Kobliner points towards opening a Roth IRA. Beyond that, she offers a long list of additional things you can do if you want to save more.

Oh, Give Me a Home
Rent or buy? It’s a question that many potential homeowners ask themselves (in fact, I’ve finally come to my own conclusion on this … but that can wait for another day). Kobliner suggests some simple rules: if you can’t envision yourself in the same place in several years, rent. If you don’t have a steady income, rent. Don’t assume you get a tax break from buying (the standard deduction can often be more).

If you do decide to buy, you’re again better off waiting. Get a healthy down payment in the bank – 20%, at least. Get your credit into thorough shape. Have a steady, stable job and a tax return that demonstrates this solid income.

Insurance: What You Need and What You Don’t
On the insurance issue, Get a Financial Life covers the basics: life insurance, disability insurance, health insurance, homeowners and renters insurance, and auto insurance. In each case, shop around and investigate all of your options.

Kobliner’s style is to explain all of the options available in a readable style and more or less allow the reader to draw their own conclusions. While this is really helpful, many people often turn to such books to largely be told what to do. The answer isn’t always cut and dried, so Kobliner takes the analytical route – if you spell out clearly the pros and cons of a lot of options, a thoughtful person will clearly be pointed to the right answer for them. That’s why I think Get a Financial Life is a great option for a young, analytical, and thoughtful person – it doesn’t just cram a conclusion down your throat, but explains options in a clear and reasonable way.

How to Make Your Life Less Taxing
The book wraps up (aside from some appendices) with discussions on how to minimize taxes. She offers up a huge list of ways to trim your tax burden via tax writeoffs and deductions.

Surprisingly, Kobliner doesn’t really discuss tax preparation software. We’ve used TurboTax to prepare ours for years and it’s been quite worthwhile, especially with the challenges of filing if you’re self-employed.

Is Get a Financial Life Worth Reading?
Get a Financial Life is short on motivation and long on facts. That makes it the perfect book for some (simply because it stacks so much information together in one place) and useless for others. Unfortunately, it also means that it covers a lot of the same ground as other personal finance books – there’s more detail, but there’s less motivation.

Get a Financial Life works for someone who already is heading in a stable financial direction and has an analytical mind that thrives on facts. Kobliner does a great job of breaking down the pile of information out there.

Get a Financial Life won’t change your life, but it can provide all the meat you need to head in the right direction. For some, that’s perfect. It’s a well-written example of an information-heavy personal finance book.

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Review: Get A Financial Life