Jan 11

How Your Expectations Are Ruining Your Life

Get straight A’s. Graduate from a top ten college. Get a job making at least $X in your exact perfect city. You probably have many expectations for your life. You did not even realize that these expectations were ruining your life and were hindering you from leading a more fulfilling life.

A life spent chasing expectation (or others’ expectation for you), is merely a life running from disappointment and failure as these negative outcomes are the hidden alternatives to our specific expectations. The thought of not achieving these goals is perceived as a failure. What is driving you, your goals or your fear of failure?

In School

I am a big proponent of education. All types of education. Even education for education’s sake is beneficial. If you did not happen to get into your top choice schools, you might view yourself as a failure. A degree is a qualifier not a determinant of future successes – meaning it may get you in the door for an interview or for grad school, but there are many factors that also contribute to your success. Your expectations for your life have gone to hell and you have never even sat in a classroom. Be happy you got into the best school you could and concentrate and doing well with that opportunity.

In Relationships

I have known a few people that refuse to deviate from their expectations of what attributes their significant other should possess. Needless to say, these people are usually single as they cannot recognize a potential significant other through these clouding expectations. Relax and get to know someone for who they are as a complete person before you immediately write them off as not meeting your pre-conceived notions.

At Work

People set career benchmarks. They want to be at a certain place by a certain age. Sometimes it’s all salary and other times they are after a title. Achieving anything less than their expected career benchmark is viewed by them as a failure. A lot of people finally be made a partner at their firm for example, and they have no one to celebrate with because they alienated everyone in their lives to get their title. Keep your career in perspective. Work hard. Look out for new opportunities and make sure you are challenged continually and compensated fairly.

In Your Investment Portfolio

There is not a money manager or retail investor out there that has who hasn’t had a bad year. You have to curb your expectations and be realistic in your forecasts. Sometimes things happen that are out of your control. You cannot let your fear failure and of the riskiness of the markets keep you out of the game. Read all you can about investments. Study profiles of the professional managers. Develop a sound strategy and execute it with confidence.

You need to change the way you think about your life’s goals. Instead of waiting until you achieve one of your milestone stretch goals to take a breath, celebrate the process of working towards them. Recognize all of your efforts towards these goals as successes and let your small successes drive you. It’s the journey not the destination.

Throw all of your expectations out  the window and enjoy the surprises that life throws your way. Allow your expectations for life to be dynamic. Keep your eyes peeled for opportunities that you never considered. Your life will undoubtedly not turn out as you expect it to and that is perfectly ok because that’s how life works.


Jan 11

Movie Musings: A Bronx Tale – Is the Working Man Really a Sucker?

One of my passions in life is movies. I love watching them, thinking about them and now writing about them. Recently, I was able to catch one of my favorites, A Bronx Tale. One of the main themes in this movie was the conflicting attitudes and lifestyles of the main character, Cologero’s, father, Lorenzo and the local Mafia boss, Sonny. Sonny teaches Cologero or “C” that the “working man is a sucker.” C’s father, Lorenzo is a working man. He is a bus driver who struggles to keep C on the path of honesty and a good work ethic – which becomes more difficult as C starts bringing home wads of cash performing menial tasks for the gangsters as a ten-year-old. Is the working man really a sucker?

I define the working man as the middle-class guy. He works hard. He occasionally gets dirty. Sometimes works behind a desk. He will never get rich, but he takes pride in the sturdy roof over-head and the hot meal on the table.

The working man has little left over to save – let alone invest, but if he works for his company long enough he has a hefty pension with his name on it! The working man is a man who works. The problem is that if he is not working, he is not getting paid. If Lorenzo from the movie doesn’t drive his bus, he gets no paycheck. Moreover, he is not employing a term called leverage anywhere in his life to increase his income and work for him when he is doing something else.

Conversely, Sonny utilizes leverage and he probably does it a few different ways. Sonny has his minions out collecting for him and bringing him his cut. I am sure they are collecting for legal and totally legitimate businesses. Regardless, Sonny is leveraging other people to get more work done than if he worked twenty-four hours a day, seven days a week.

Sonny most likely also has made some strategic investments with his extra cash. So here he has cash working for him while he is just sitting back, managing it and earning money!

Leverage is a necessary tool in most people’s financial tool box sooner or later in their lives. In fact, Lorenzo probably used leverage to mortgage his apartment. The difference is that the apartment is not an asset as it costs him money instead of makes him money. If he would have leveraged more and purchased a building, then that cash flow from his tenants would be making him money and his building would be an asset. The working man usually doesn’t have the means to secure a mortgage this large as he is working to pay for the necessities of daily life. The more automatic your investments are, the more freedom you will have to do the things that matter the most to you. This is called passive income. Passive income allows you to do something enjoyable and still realize a return.

The working man is not the only American that Sonny may have a problem with. Most entrepreneurs are can also be described as self-employed. A self-employed man can range from a doctor with his own practice to a plumber driving from customer to customer in his own white van. The self-employed, assuming they have no investments, will also have an issue if they decide to stop working. This guy will essentially turn the cash flow spigot off if he decides to retire. The issue is that they may have built a successful business, but the business is effectively himself as an individual with no use of leverage.

So is the working man a sucker as Sonny believes? I have a hard time putting the “sucker” label on a guy that gets up early every day without fail and goes to perform a job that is vital and thankless all for the survival of his family. However, the working man is just a guy that uses all the talents he has to make the most money possible, same as the entrepreneur. The downfall of the working man is that he has not yet discovered how to use leverage to free up his time so he can do things he really enjoys – but a sucker? I don’t think so Sonny.


Jan 11

Why Failing Will Be the Best Thing That Ever Happened to You

Winners always win right? Wrong. Every winner is a product of a long line of failures plus an ounce of luck and a pound of persistence. Winning is actually a process which needs to be developed. Part of the process of winning is learning how to fail. Learning how to fail will provide you with powerful lessons to apply to the next business venture or your next trade.

Learning how to fail takes a lot of work. Luckily, failures usually mount quickly, giving you mounds of material to sift through for lessons. When dealing with a failure, it is necessary to pick apart the event to see what went wrong, what you could have done better and what you will do differently next time. The earlier you get on the learning curve the faster you will progress through the necessary setbacks and begin to win.

A loser will not do this.

A loser will quit because the weight of the failure will prove too much to bear. A loser curls up in the fetal position and waits for someone to make it better. They are unlikely to be able to get the loss or failure out of their mind and these thoughts will fester and hinder them from taking future risks – eventually turning them into a bitter loser. A bitter loser will have stern warnings and violent head shakes when conversing with any individual still working on the process of winning.

Obviously, the bitter loser is the worst kind of loser. All optimism for life and an irrational blame game with risk has developed. Avoid a bitter loser at any cost!

Failing is the best thing that can happen to you. You learn adversity, determination and humility – all necessary attributes for a successful life. Whenever someone brags about a life without failure or an investment portfolio without loss, I am always skeptical. Either that person has not ever pushed themselves to be great, never took chances or is dishonest. Maybe this person has never left the cozy confines of their comfort zone.

Living in your comfort zone is a recipe for monotony, average investment returns (at best) and a run-of-the-mill life.

Like any pain in our lives, a failure stings, burns and makes you sick to even think about. These emotions will not last. Only you will know when you are ready to apply the lessons learned and get back on that horse – whether your horse is the stock market, an entrepreneurial venture or a relationship. Accept and embrace failure as a necessary bump in the road and a valuable education. Ask yourself, “what can I learn from this setback?”

Avoid becoming a loser by keeping an open mind to the possibilities that lie ahead for you in the future. Be wiser next time and your failure will make you a better winner in the markets and in life.


Jan 11

The Rolex Dilemma

I recently had a conversation with a friend about his impending Rolex purchase. He had the money saved up for the watch, but was not sure if he should buy it. This guy has always been a “watch guy” and he has progressively climbed the watch ladder to a point were a Rolex was the logical next rung.

“Watch guys” are guys that see value in having a status symbol on their wrist that costs more than a lot of people’s cars. The timepiece in question was a Rolex Submariner and the price tag was around $5,000. Just because this guy had an ING savings account dedicated to this goal and had managed to save the cash, had no debt and lived generally frugally, does that automatically mean he should pull the trigger on the Rolex?

Rolex photo by hypo.physe via Flickr Creative Commons

I am not a watch guy. The thought of shelling out that much money for a watch that will provide me no benefit but to tell the time, gives me a mini panic attack. I have a Seiko. A fine Japanese timepiece that has always let me know what time it was and even provided the added benefit of showing the date – all for $200! Watch guys laugh at my ignorance. I can scrounge up the money for a Rolex if I wanted one. I could delve into savings; move some investments around – whatever it took.

I cannot help but to run through all the possible uses for that cash besides a watch. I should note that I do have a problem spending in general. I am more comfortable leaving cash in investments. Once in a while I can talk myself into buying something if I can somehow contort my thoughts of the purchase into thinking that it was an actual investment.

My thoughts turn back to the conversation with my friend and how he systematically laid out all the benefits of a Rolex. He stated enthusiastically how this watch is something you can leave to your kids or grandkids. He adoringly flipped through webpage after webpage of happy watch guys enjoying their Rolex’s with their beautiful families and requisite Labrador glaring adoringly at his master. He went through the technical specifications and I now know that if he ever happened to be diving with his Rolex, the watch is rated to a depth of 1000 feet. The presentation was very compelling, but I am not a watch guy.

It did not seem like a good use of the cash he worked hard for and sacrificed to save. He makes a good living, but I could not see spending this type of money for a watch unless I was up in $750,000 range.

That’s me though and I am not a watch guy (did I mention that?)

He is a watch guy and he sees great value in the Rolex. It makes him happy to let it slightly peek out of his shirt cuff. He can even make a persuasive argument that the Rolex is an actual investment. I am not tempted to go out and buy a Rolex and I honestly highly doubt I will ever be.

I believe we need to reward ourselves in life. We work hard, save and invest and as long as we save with a purchase and have no debt we should give ourselves rewards to keep life interesting. I think that for most moderate income people, big ticket splurges should be narrowed to the few areas that we really enjoy. A Rolex for the “watch guy,” but not a Rolex and a Porsche as the Porsche is designated for the “car guy.”

It’s important that you figure out what kind of “guy” or “girl” you are so you don’t end up splurging on items that you are only going to enjoy in the fleeting moment. Just because you have enough to purchase the Rolex in your bank account does not imply in any way what-so-ever that the purchase is anywhere approaching the realm of practical. A Rolex is not sensible and never will be. However, if it’s a reward for living sensibly and you are sure you are a “watch guy” then it is acceptable. I suppose.


Jan 11

The Three Pillars of Wealth Creation

If you would like to be wealthy and have not yet been able to acquire wealth, you need to develop habits that support your objective to build it. Once developed, you then need to commit to those habits and to that objective.

People throw around the term “commitment” haphazardly these days. If you look-up the definition of “commit” on Dictionary.com, you will get an assortment of definitions all dancing around giving some sort of obligation or the act of “being committed.” While these meanings are all accurate and some people may think you will need to “be committed” to an institution once you commit to wealth-building, these terms seemed watered-down to me.

There is a huge difference in saying someone committed suicide and someone committed to a marital obligation, for example. When someone commits suicide by leaping from a roof, they cannot revisit and amend the decision on the way down – they are indeed committed to the decision in which they made. Marriage is different. Sure there is an obligation and an expectation that the union will last forever, but marriage can hardly be viewed as a commitment the same way the leap off a building can (but some may argue the outcome is the similar). The difference is the “out clause” which is implicitly or explicitly available to us in most decisions we make in life. With the divorce rate in the United States dancing around 50%, many people have revisited their decision to “take the leap!”

Committing to wealth-building is committing to a way of life and not trying out a new idea or fad that you can easily cease if the wind happens to blow from a different direction on a particular day. Similar successful commitments can be seen in the realm of weight loss. You know the before and after pictures where the individual holds up the big pants? If you read enough of these stories a common theme will emerge. These successful examples made a positive and life-changing commitment to dieting and exercising and have experienced the amazing result you see in the photo of them holding up their big pants.

These men and women developed habits that changed everything they did throughout their day. The way they shopped, the way they slept, the way they went to happy hour, they way they celebrated holidays – there is no realm of their life unaffected.  Committing to building wealth is exactly the same. You will have to develop new habits in the way you shop, where you live, how you eat and every other aspect of your life. The objective is becoming wealthy and living a life of abundance and the before-and-after photo is you holding up a picture of where you dream of being.

Wealth is abundance, but wealth is not necessarily money. Having money and investments throwing off passive income can just be the instrument in which you are able to live abundantly. If you have no debt and some strategic investments paying you an acceptable return, you don’t even need high income to live abundantly and consider yourself wealthy. You can decide how to spend your time! Committing to building wealth is committing to live your life with careful management of what I call the three pillars of wealth creation – debt, income and investments.

Pillars photo by Mandy Dawn via Flickr Creative Commons

Pillar One – Debt

Debt, or leverage, is a normal part of most people’s lives and essential in managing the operations of most corporations. Getting something today and paying for it later is appealing to most people as they gain some pleasure from the purchase and want to experience that pleasure now. The acceleration of their personal enjoyment is a habit people come by innately and it is a negative spending habit that people must drop to be wealthy. Instead of making the decision to buy an item based on the pleasure derived and the time-table in which that pleasure is derived, the decision should be based on the future consequences of the decision to finance the good.

Not all debt is bad. Debt can be used to elevate one’s income (Pillar Two) through the financing of an education. Debt or leverage can also be used to provide the necessary capital for an investment (Pillar Three). Each pillar is inter-dependent on the other two pillars and strategies to increase wealth can be formed by manipulating one, two or three of the pillars. There are many scenarios one can put in play to achieve the objective of building wealth.

Pillar Two – Income

Income is often confused with wealth. If a doctor or a lawyer brings home a few hundred thousand dollars per year, they are often mistakenly labeled as “wealthy” and this is not necessarily true. The most striking example of this large paycheck phenomenon is through the observance of professional athletes. We are all inundated with the headlines every time an athlete signs a new contract for tens of millions of dollars. Then we are all shocked when we read about an athlete’s bankruptcy filing just a few years into retirement. The athlete hit pillar two out of the park (pun intended), but failed to manage the other of the other pillars.

For many Americans, income is a way to keep a roof over their heads and food on the table. They simply do not have the ability to invest as they have nothing left over. Occasionally, they even need to use credit cards to cover these basic human needs – which trigger a downward spiral of hopelessness and despair. Income and debt need to be mastered before one can begin to learn about investing. Often times, a highly-paid professional with a large house and a nice car also works just to pay the $5,000 mortgage and the lease on the Bentley. A plumber with a savings account that lives under his means will have a higher net worth that the highly-paid professional.

Pillar Three – Investments

Investment is the management of accumulated wealth. How many lottery winners go bankrupt because they are so unbelievably ignorant on investing they blow two-hundred million dollars on solid gold telephones and diamond-crusted golf balls? I am being a tad facetious – but only a tad. The hard part is getting the nest-egg built up enough to have to consider the investment pillar. On the other hand, I cannot really blame someone who is the third generation in his/her family just working on not going too far into credit card debt and trying to increase income. These negative habits are learned and passed from generation to generation. Most people are completely unaware of investing and in their realm. To them, there are only two pillars.

Saving is not investing. Saving is setting aside cash for some future purchase and attempting to earn as much interest while you wait. Savings will eventually be spent.  Ideally, investments have no timeline. You should plan on never spending the principal used to make your investment. Occasionally, you may sell an investment for strategic reasons and invest the capital in a more optimal investment, but you should not shift that money to anything that is not an investment of acceptable return. You should plan on spending only the interest or dividends spun off of the investment to make your money last.

For even diligent savers and investors, reaching this investment utopia will not happen. Even in retirement, a portion of the principal invested may have to be spent to support the retiree’s lifestyle. The reasons for not reaching this pinnacle are many and depend on an individual’s age and a myriad of other contributing factors, but the concept is sound and to be committed to building wealth means being committed to this objective and being committed to this objective you need to develop habits that support this commitment in every aspect of your life.