Mutual Improvement

Want to make more money? Drink more.

It's easy to make more money: just drink more!  In particular, drink socially with friends (drinking at home alone has no apparent correllation with making more money, even though I'm positive it must have some impact).  The Journal of Labor Research says social drinking boosts your income, so it must be true right?  It's always nice to run into an article that casts your weaknesses as strengths and your addictions as good habit.

Let's count the cognitive biases and logical fallacies in this study, just for fun.

Reader poll: How much of your income do you spend?

Once you have your daily allowance figured out, you can track your expenses, and figure out whether you're over or under your allowance, and by how much.  It might take a full month to get a good number, as bills and irregular charges add a bunch of variability to the data.

Like goldfish, we like to expand to fill our means.  If you make a lot of money, you're tempted to buy a nice big house.  If you have a nice big house, you are tempted to buy more furniture.  If you happen to have a big yard, or a boat dock, more ideas start spinning.  If you have a big house, you might need to find a higher-paying job.  We'd all like to get to a state of mind where we know what we want, and don't merely spend to fill up spaces in our budget and our environment.  But we have to start somewhere.

Just curiously, how much of your paycheck do you spend on a monthly basis?  Are you living above or below your means?  If you don't know exactly, just guess.  It's anonymous, so you can be honest.

Mindfulness as an alternative to impulse purchasing

For the last few weeks, I've been stalked by some mysterious gadget.  It haunts my thoughts but I don't even know what it is. 

It might be Steve Jobs fault.  A couple weeks ago he introduced new ipods and showed off a futuristic iTV gadget.  Those looked cool!

It might be leftover interest in GPS tracking devices I was looking at a few weeks ago.  It may even be some unsettled desire from that camera I bought earlier in the summer.  I've still got a hole that I didn't quite fill.  I'm not sure what I'm after, but I find myself checking Gizmodo for the perfect new, new thing.

I've got a few other influences countervailing the impulse to spend.  A bunch of us have adopted a goal to track what we spend for a week.  It's a simple way to increase awareness about where our energy is going.  Money is a store of exchangeable value, but we get it by exchanging our life energy for it.  I keep thinking, "How crazy is it that I'm dying to part with my money, for some mystery gadget I probably don't even need".   I've also been reading some books about buddhism and meditation and those have me trying to be mindful of my thoughts: just hanging back and observing.  Its funny how a spending compulsion sweeps you up.  By being mindful of your thoughts, you can feel the drive to consume change the way you are thinking moment by moment.
 
I'm enjoying "hanging out" with the spending compulsion so much that the entertainment I'm getting from introspecting is starting to replace the desire for a new thing.  Try it yourself:  consider tracking what you spend for a week, and the next time you get swept up with a craving for the new, new thing, hang back and be mindful of where the desire is coming from.  You might find that learning about your compulsion is more rewarding than the thing you thought you wanted.

What's your real daily allowance?

This might seem like a no-brainer to people who have their finances all figured out, but for people like me that don't really pay that much attention to my bank account other than to make sure there's still money in there, I found this to be a great exercise.

What is your total income, broken down by day?

Depending on if you get your paychecks weekly, bi-weekly, twice a month on specific days, or monthly, you'll have to calculate this differently.  If your income is irregular, that might also make it more difficult to determine.  I get paid bi-weekly, every other Friday, so I just divided my last paycheck by 14 to get my daily income.

What are your regular expenses?

Every month I have to pay the same amount for my mortgage and my condo dues, so rather than have to worry about them too much I decided to subtract them from my daily allowance.  Just to be anal about it I multiplied them both by twelve and then divided that amount by 365 to get my amortized per-day amount for regular expenses.  I did the same for property tax.  This was an interesting exercise in itself because you will essentially find out how much you're paying every day for your living situation.  I'm paying a lot more than I would've guessed.  I could save money by living in a cheap hotel.  People would make my bed and clean my bathroom for me.  But I guess there are trade-offs as well.

How much do you want to save per month?

I have a new goal to live on 43 Things to live within 80% of my income.  There's a bit of flexibility about what that actually means, so here's my definition: I'd like to live off of 80% of my post-tax income, after 401K, but before regular expenses.  To get the 20% that I'll need to subtract from my daily income, I took the total daily income before removing regular expenses and divided that by five.  That number is the 20% of my income that I'd like to save each day.

Calculate your daily allowance

Subtract your daily regular expenses and daily savings from your daily income to get your daily allowance.  Knowing exactly how much I could spend, on average, per day was very satisfying because it's a real number that you can keep in mind on a daily basis.  If you go over one day, it might help you realize that you need to spend a few days going under.

If you give this a try, let me know how it goes.  Did you do anything differently?  Was the final number more or less than you had hoped it to be?

Desire to succeed vs. fear of failure

What motivates you more: the desire to succeed, or the desire not to fail?  Paul Graham mentioned in a talk on funding startups I saw at FooCamp that the fear of failure is a much stronger motivator than the desire for success.  He says, "Fear of failure is an extraordinarily powerful force.  Usually it prevents people from starting things, but once you publish some definite ambition, it switches directions and starts working in your favor."  We live between success and failure, and, while we would all love to gain respect as one of the truly successful, we definitely don't want to be one of the biggest failures. 

How much credit card debt does the average American have?

Depending on your sources, Americans are either in a lot of credit card debt trouble, or not much at all. 

Bankrate.com lists 25 fascinating facts about personal debt, including:

Average per household debt in the U.S., not counting mortgage debt, is about $14,500 -- especially noteworthy because before the 1930s, most middle and working class people had no major debts. Banks would not lend to them; they rented their homes and if they did own a house, it was paid for as it was being built.

Some 40 percent of American families annually spend more than they earn.

Average credit card debt among all American households is $8,400.

Average card debt among people who have at least one card is $9,205 -- triple what it was in 1990.

But then, if you look at another source like MSN Money Central's The Truth About Credit Card Debt, you hear something completely different:

Only 29% of households owe $1,000 or more on their cards.

23.8% of American households have no credit cards at all -- no bank cards, no retail cards, nothing.

Another 31.2% of the households the Fed surveyed paid off their most recent credit card bills in full.

So who do we believe?  Are these facts even mutually exclusive?  It's possible that 60% of people have their debt affairs in order, and 40% are in various states of debt trouble, I suppose.  It's an interesting case of using numbers to tell different stories. 

In any case, it looks like all sides agree that average debt is rising, and that a certain percentage of people have incredible debt as it is.  But is that percentage 1% of all Americans, 10%, or more?  Are they the exception or the rule?  What's your experience?

Self-Sabotage Finance

It seems like almost everyone has money problems of some sort.  How rarely do you come across someone who, if asked, "Do you have any money problems?" would say, "Absolutely not."  If you are one of these people, I applaud you.  You'll probably live to the age of 130 simply for not having to bear the weight of all that constant money stress.  The scale of the problem (for the rest of us) varies quite a bit, from having $20,000 of credit card debt and living outside your means to simply not being able to save as much this month as you wanted to.

The thing with money problems is that you can become attached to them.  They tend to become a part of you and your personality/self-identity.  There's a certain appeal to being broke, or to constantly trying to save more and more.  It's a problem we can all relate to, so it bonds us to other people with similar problems.  In addition, there are certain behaviors and beliefs that we adopt which contradict our desire to resolve money problems.  For example:

• You don't like to look at your credit card statement because you don't want to know how much you spent.  This is a primitive defense mechanism that avoids the problem while making it worse (and we all know this but sometimes can't stop it).
• You don't want to pay off your debt because you know you'll just buy something else right away once you can.  I know plenty of smart people (especially common among early adopters and technology lovers).  However, if you can't trust yourself, you'll never allow yourself to be responsible enough to solve the money problems that you have.
• You dislike people who don't have money problems.  You'll never attempt to resolve your own problems if you think having problems makes you a better person somehow.  It's possible to solve problems without creating new ones.

There are many more of these kinds of behaviors and beliefs hiding within each of us. They are harmful because they are contradictory to other behaviors and beliefs that you might have.  Real stress occurs when you both feel bad about having money problems, and don't want to solve them... this creates a constant pressure of stress and tension that is unresolvable.  One side or the other of this pressure needs to go, and in that way you can either learn to love poverty (there are some advantages), or begin to take active steps in resolving whatever money issues are currently bothering you.

A challenge: This week, all of us at the Robot Co-op have decided to track everything we spend money on for a week, and are going to try doing it a number of ways.  The goal at this point isn't really to solve our money problems just yet, but simply to become more mindful of the money that comes and goes, as it comes and goes.

This post was inspired by this slightly more bitter post of things you can do to sabotage your life: Tutorial: How to Sabotage Yourself - Associated Content [via Lifehacker]

Poll: What are your beliefs about money? (pt. 1)

What are your innate beliefs about money?  Depending on how you think money and wealth are acquired, you will go about trying to get it in different ways.  If you think it's largely a game of luck, you might consider hopping from startup to startup with a lightning rod waiting for one to be struck.  If you think it's a matter of hard work and perserverance, perhaps a healthy corporate ladder is calling your name.

Pick the strategy that seems to be most in line with your beliefs about the source of wealth in our society.

Cultivating Happiness: How important is Money & Wealth for being happy?

I just got back from a great weekend in Vancouver, BC with my family. British Columbia is known as "lotus land" for the paradise like conditions the Canadians have cultivated in that corner of the continent - and I think they are really on to something. The city is so cosmopolitan: a mix of cultures, languages, cuisines -- and the people seem to take a lot of pride in the way they've cultivated a friendly, civic environment. It's a fitting venue for the Dalai Lama, who'll be in Vancouver this Fall to talk about "Cultivating Happiness"

In preparation for this visit, the Dalai Lama Center commissioned a poll of Vancouver residents. The questions, and the results are pretty interesting, especially in terms of the role of this month's theme "Wealth & Money". First, here is the scripted questions from the poll:

1. On a scale of 1-10, 10 where 10 means being most happy, how happy are you?
2. What in your life makes you happy?
3. And what in your life makes you unhappy?
4. What do you do when you are unhappy to feel happier?
5. Which of the following two things would make you happier:
a. To be handsome/beautiful or to be successful in your career?
b. To be rich or to be thin?
c. To have people say you’re funny or say you’re smart?
d. To have inner peace or to have material wealth?

To the question "What makes you happy?", people responded "Family" with an overwhelming 48%, and "Friends" second with 15%. "Money" trailed way behind with only 5%.

However, when asked what makes you unhappy, money was firmly in the lead.

Another interesting question was when people were asked to trade off material wealth and inner peace. Poll respondents went for inner peace in a big way.

So this pretty much looks like a slam dunk for the buddhists! Cultivate happiness by letting go of your attachments to material wealth, and instead find pleasure in inner peace and family. Or maybe it was just too embarrassing to tell the pollsters that your family drives you crazy and you really want to live the life of Paris Hilton? Who knows. But I can't imagine many people end life wishing they'd made just a bit more money. Its seems to me that regrets in life are usually more about something we wish we'd done or something we wish we'd said.

So back to work, now that labor day is over - and chances are you'll earn some lucre today -- but make sure you say and do what you mean to as well. Chances are, you won't regret it.

You can download a pdf of the full results from the Mustel Group website.