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The Cost of Whistles - Living Successfully
I love reading old books and stories about early pioneers in business. I came across the following article in a little pocket-sized publication series from the 1940’s, titled “The Art of Living Successfully”.
I believe that “There is nothing new under the sun but there are lots of old things we don’t know”, as Ambrose Bierce
Manage Debt by Spending Better
The hero in our story is Benjamin Franklin
Among the trinkets offered by a peddler at a fair was a whistle which caught the attention of young Benjamin, and which he coveted. He resisted the temptation for some time; eventually giving way he bought the whistle, paying a price in excess of its value.
In later years the memory of that transaction brought forth this sage observation:
“I conceive that a great part of the miseries of mankind are brought upon them by the false estimates they have made of the value of things, and by their giving too much for their whistles.”
This bit of wisdom holds good for today. A sense of values is essential to the proper conduct of business and personal affairs.
Overpriced pleasures and wasteful delights are to be counted among the costly whistles. Often their price is far out of proportion to the amount of permanent good they produce and contribute to human welfare. Anything is costly, no matter what its price, if it purchases nothing of importance or worth to human character and the power of personality.
If the price of our whistles are high and the use of the whistle small, the transaction is poor and the person poorer – today even as in the day of Benjamin Franklin.”
- from “The Art of Living Successfully” – April 1941
Tags: finances, financial books, wealth
Easy as 3, 4, 5… All About Your 401K
Would you be interested in a way to save money that doesn’t cost you anything? I mean, if I started depositing money into a savings account for you, would you accept it? Of course you would…
So why aren’t you? What am I talking about? I am referring to your 401K (or 403B) program at work. Most companies today offer these programs, so if you’re working for a company right now, chances are you have the ability to sign up. Have you?
If not, you’re not alone. An extremely low percentage of employees who are eligible for these programs actually take advantage of them. The excuses are many, like you can’t afford to have anything deducted from your pay? Or you don’t plan on staying with this company for very long so why bother? Or how about, if it’s such a good deal why doesn’t my employer tell me how good it is? Let’s look at these excuses one by one:
1) I Can’t Afford It
Awhile back, while working at another company, I was involved in putting together the presentations for our annual Employee Benefits general meeting. We had all the biggies in the company there at the planning meeting, including the company’s attorney.
Our CFO (Chief Financial Officer) had prepared a PowerPoint to show the employees that explained the benefits of using the company’s 401K program. He had calculated that if each employee would contribute 3% of his/her income into the plan, there would be no noticeable change in the take home pay of each person. Because the contributions go in pre-tax, the tax savings and small company match actually offset almost perfectly the 3% deduction.
He was very excited about showing this slide show because it was like handing the employees free money – how cool is that? But our company attorney nixed the presentation and he never got to give it (see below). But I saw it. And I was shocked at the numbers. So, try it yourself by putting 3% of your pay into your 401K plan. Your paycheck will probably not drop at all and you’ll start getting free money that you are currently giving to the government.
2) Not Staying with the Company?
So what? The account is yours. If you leave the company, you can just keep your money in their account for up to 18 months, roll it over into an IRA, or roll it over into your new company’s plan. It’s your money, regardless if you keep working there or not.
3) Why doesn’t the employer tell me how good it is?
They can’t. It’s illegal for your company to “encourage” you to contribute to your 401K account. Remember that presentation that the CFO in #1 put together? He couldn’t show it to the employees because it could be viewed as coercive or intimidating, creating a hostile work environment (giving you free money is “intimidating” and you might sue – and would probably win.)
Why? Because companies benefit by having their employees in these plans, so they aren’t allowed to tell you to join. They may abuse the privilege. So they say as little as possible, other than – we have a plan if you want it.
So, sign up. Start with just 3%. Once you find out that 3% is do-able, go to 4%, then 5%, etc. Work your way up and you’ll create a nice pile of savings without having to change your spending habits to do it. It’s as easy as 3, 4, 5…
Tags: 401K, employment, irs, tax credit
Whatever Happened to Buying the Ugliest House on the Block?
One of my favorite authors is Andy Rooney. (For you under-40 youth out there, Andy Rooney is that amply-eye-browed curmudgeon who’d give those whiney-witty editorials at the end of “60 Minutes”. And for you under-30 types who learned about Ronald Reagan from your US History books in school, “60 Minutes” was once a well-respected CBS news show.)
In one of Andy Rooney’s books, he had a chapter about what’s wrong with American society (actually, that doesn’t narrow it down much because most all of what he wrote had something to do with what’s wrong with American society). But this particular chapter really hit me as being a “Wow, I never thought of it like that before.”
Boys Don’t Tinker Anymore
Rooney said that the reason our society is headed in the wrong direction and why our economy is in danger of collapsing someday is because “Boys don’t Tinker anymore”. He went on to describe growing up in an America still feeling the effects of the Great Depression in the 1930’s. When something broke, you fixed it. Nothing got thrown out until it couldn’t be held together any longer. Every town had a local fix-it shop, with clerks who actually knew how to fix things. Every garage was stocked with hand tools, clamps, vices, spare parts, and duct tape.
When something finally did need replacing, the old unusable item was given to the boy in the family who would tinker with it - maybe getting it to work again, maybe using the parts to make a go-cart or a rocket ship to Mars. Something broke and any eight year old boy with a Philips Head and glue could get it going again. “Assembly Required” meant “forget these directions” and feeling proud if you didn’t need all the parts to get it working.
Extra Parts = Extra Points!
But boys don’t tinker anymore today, Rooney points out. Something breaks, it gets tossed in the trash. Or it doesn’t break – it’s just old – so it gets replaced by the newer model anyway - because ya gotta keep up with the newest thing. Fix something? Are you kidding? We don’t fix things anymore. Don’t believe me? Quick, give me directions to the nearest fix-it shop.
Don’t Sell Me No Good Bargain!
This week, I read an article about First Time Homebuyers, and I immediately thought of Andy Rooney’s tinkering observation: The article said, “A recent survey found that first-time homebuyers’ expectations may be too high relative to their current financial buying power. Up to 81% of today’s first-time homebuyers consider move-in conditions very important, with only 7% looking to purchase homes they could buy at a lower price if they renovate themselves.” (Seriously? Only 7%???)
Whatever happened to the “buy the ugliest house in a great neighborhood” school of real estate investing? Put a little love and elbow grease into your ugly home purchase and watch it become something you love AND grow in value. Instead, we’re too impatient for that. The home has to be perfect before we move in. We spend more than we can afford. And all because we just don’t know how to tinker anymore. Andy Rooney wrote that book back in the 1980’s and warned of a doomed society with no tinkerers. Hmmm…
Huge Opportunity for Tinkerers!
It’s time to get back to smart investing, smart spending, smart home buying – so if you have “tinkering” skills, what a HUGE opportunity for you to buy a bargain! AND you’re only competing against 7% of the other first time homebuyers out there on those fixer-uppers. Let those other 93% fight over the new construction and perfect condition homes and pay too much for them. You can pretty much name your price on something less than perfect.
Tags: buying a home, home renovations, real estate, real estate investing
Should You Buy The “Ugliest House On The Block”?
There are some nervous times going on in the financial markets right now. What we’re finding right now is a phenomena called “Flight to Quality” – where people are putting their money in the safest investments they can find. You’re not seeing wild speculation going on. Investors are just happy if they don’t lose money and they aren’t expecting big gains on anything they buy.
The housing market is the same way. For many years, it didn’t really matter what house you bought. Real estate values were going up so fast – you just needed to buy “something”, and if you didn’t like it – so what? Keep it for a little while, flip it for a profit, and buy what you really want later. Real estate was a no-lose investment. Buy it and it’ll be worth more tomorrow…
Real Estate “WAS” a No-Lose Investment
But times have changed, and there’s a “Flight to Quality” going on in real estate now too. Buyers are being much more selective about what they buy – which is the way it should have been all along. And the best “Flight to Quality” buying technique is the old “Buy the ugliest house on the block” strategy.
If you’ve got fix-it-up skills, you can still use real estate to make yourself wealthy. You get the ugly house in a good neighborhood, fix it up to the same quality level as the rest of the homes around you, and you’ve just created extra Quality – extra Value. This was an extremely common home buying and wealth-building strategy for many years in America, but is rarely used these days. So again, if you’ve got the skills, you have a HUGE advantage in real estate right now.
No Fix-Up Skills? No Problem…
Even if you don’t have the skills to do-it-yourself, there are terrific opportunities to pick up fixer-upper distressed properties at bargain prices and using rehab financing and construction loans to pay for contractors to do the work for you. Ask your lender about the FHA 203K Streamline Rehab Purchase loan (Whew! Big name). You can use an FHA loan to buy the home and finance an additional $35,000 in home repairs above the purchase price. Find a home that needs a little love, hire a contractor to make it good as new before you even move in, and you can end up having 10-20% equity in the home right off the bat. Very cool! And a GREAT way to buy a quality home at a bargain price – a great way to build wealth! (Not to mention helping to renew a neighborhood.)
Buy Low, Sell High – Some Things Never Change
So why don’t more people buy their home this way? Stay tuned for the next article titled “Whatever Happened to Buying the Ugliest House on the Block?” (after Christmas.) Just remember, real estate has helped build more fortunes in the country than anything else, and even during a downturn in the overall market – you can still find great bargains and build your wealth, if you buy low and sell high. Just make sure what you are buying low has good potential to be worth more later on.
Tags: buying a home, home renovations, real estate, real estate investing
Getting A Raise, Part III
The previous article talked about a powerful and sure-fire technique for getting a raise. We talked about committing to spending time studying your industry and learning how to do your job better. But maybe you think the idea of studying your industry and coming up with ideas to improve your value won’t work because your job isn’t important enough.
You sweep the floors, stock the shelves, answer the phones, etc., and those jobs just aren’t important enough for you to spend any extra time learning about your industry. And you’re not going to be here long enough anyway.
Any Idiot Can Do What I Do – I’ll Wait Until I Get A Good Job!
Maybe you think that, someday after you get a good job, you can start doing something like this. But for now - it just isn’t worth it? Well, please consider the story of Johnny the Bagger by Barbara Glanz. I love this story and it illustrates so nicely the point I’m trying to make.
Glanz tells of a boy with Down Syndrome who worked at the most entry-level of jobs there is – a bag boy for a grocery store. Yet Johnny began doing something extraordinary on his own and he single-handedly grew the customer base for his boss by creating the kind of “extra value” we’re talking about.
Every night, Johnny would take little pieces of paper and write inspiring quotes on one side and he would write his name on the other. If he couldn’t find a good quote to use, he would make one up. When he arrived at work, he would have a stack of these quotes, and he would place one in each customer’s bag, smile, and thank them for coming in. Pretty soon, customers were lined up waiting in Johnny’s line while the other lines were practically empty, just so they could get one of Johnny’s quotes and his smile.
How Much Is A Kind Word And A Smile Worth?
Many customers admitted shopping at Johnny’s store just because he worked there – even though it might have been easier to shop somewhere else that day. Think of the lesson here. Johnny had absolutely the least potential for making things better for his company or creating “extra value” than anyone you can imagine. So if he could have this much of an impact by a little extra after-hours effort – how much more could YOU have at your job?
That’s the kind of thing we’re talking about. Taking some “extra time” to focus on ways you can improve what you do and how your company does business – and then doing it. Do you see what Johnny did to create this value? A little study (this coming from a kid who had Down Syndrome) and an idea to make things better in his industry – and then the necessary action.
How Much Is Johnny Worth To His Boss Now?
And all of the sudden, Johnny the Bagger is a hot commodity. Do you think maybe he’d be able to ask for a raise and get it? Do you think that his store’s competitors would be willing to pay him top dollar to recruit him away?
Note: Johnny only came up with one idea and put it to work. Your assignment is to try to come up with 10 ideas a day, 5 days a week – roughly 250 ideas a year. Think something will come out of that effort that will help you create extra value? You bet it will. Try it. Your short-term income will improve and your long-term prospects for success will be virtually guaranteed!
Tags: employment, finances, getting a raise, wealth
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