A Eulogy: the Penultimate of Goals

I just realized that every, and I mean EVERY, book I've read on success, investing, and business always has a section on Goal Setting. It doesn't matter if the author is a steady investor, a speculator, or Rich Dad - they all say that without goals, it won't happen.

Yogi Berra says, "If you don't know where you're going, how will you know when you get there?"

More on actual How To for goal-setting later. First, I want to talk about a part of goal-setting, the Eulogy. The exercise goes - imagine you're sitting at your own funeral. People are getting up and talking about your life and how you affected them, giving eulogies. What would you like to be remembered for? What do you want people to say about you? Write for them - what would you like the following people to say:

1. Your partner or spouse
2. Your child
3. A co-worker or business partner
4. A stranger, someone who barely knows you
   

Now, I've thought about this a bit but never really did it. About five months ago, though, I saw the perfect example, with Paul Newman's passing. Read through that article - it's amazing. And look back at the list above.

1. Married 50 years in "one of the most successful marriages in Hollywood"
2. Newman's daughters described him as a devoted husband, a loving father, an adoring grandfather and a dedicated philanthropist.
3. Awards and kind words from co-workers and Hollywood in general, including an Oscar
   
4. Some 135,000 children have been able to go to summer camp for free because of Newman's Own
   

Any one of those would be a great accomplishment. All four, and more!, is absolutely amazing. For more on his entrepreneurial success, read here and this book, here.

So what would you like people to say about you? That you 'got by'? That you 'did okay'? Settling for getting by is aiming for mediocrity. And once you know where you're going, it's much easier to recognize the road signs. It's time to sit down and write out what you want to be known for, and start making it come true.

Should I Invest? #1: Timeframe

This is the first of a 3-part article. With the economy in what I've heard called 'the Sandpaper stage' (back and forth, rubbing out your savings), I've talked to a lot of people about when to get in the market, or whether to get out completely and take the loss.

To me, this begs a bigger question: Should you be in 'the market' at all? To which I have three questions. The first is: What is your timeframe?

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It has been said the market is long-term a weighing machine, and short-term a popularity contest. This means that a good company, over time, will show it's fundamentals and be valued for being a good company. Unfortunately, it also means that it could take a long time to show that value, and be all over the place in the meantime. This is why most stock charts look so jagged, up and down. It's also why Blue Chips look smoother - their value has been established, so there isn't so much debate on price. See an excerpt of Warren Buffet's view on this here.

In our current economy, I would say that, to be safe, you need a time horizon of at least five years to be reasonably confident that you'll get to the 'weighing machine' part. If you will need your money in less than five years, you might not want to count on fundamentals alone to choose your investments.

Some History
Look at a graph of the S&P 500 over the since the beginning of 2000: it was at 1527 on March 20, 2000; then dropped and climbed back to 1561 on Oct 8, 2007; then fell again since then, and is now at 827. Which means if you bought an S&P 500 index fund in early 2000, you would have spent 7 1/2 years getting back to your starting point, not even a profit. Who knows how long until this latest drop comes back? Forget five years - from 2000, you're looking at ten years at the least!

Question #1
So the first question to ask yourself is, "What is my timeframe?" Think about it seriously and write down when you'll be needing that money back. Only once you know that can you think about the next step, your belief about the future.

Vilfredo Pareto, and the Law of the Vital Few

Vilfredo Pareto was an Italian economist living in the early part of the 20th century. He made the first observation that has come to be known as the Pareto Principle, the 80 / 20 rule, or the Law of the Vital Few. In its earliest form, it said, “You know, 80% of the land in Italy belongs to 20% of the people.”

Now it has been applied to many areas, and is considered a universal economic principle:
1. 20% of customers account for 80% of sales volume
2. 20% of customers account for 80% of profits (not necessarily the same customers!)
3. 20% of the people own 80% of the wealth
4. 20% of cars produce 80% of the pollution
5. 20% of sales campaigns produce 80% of the results
6. 20% of errors produce 80% of complaints
7. 20% of your work produces 80% of your results

The second to last point is interesting if you work in sales, service, or manufacturing – and that’s most of us, isn’t it? It means that if you can determine which small part of your job causes most of the problems, you can streamline yourself greatly with a minimal amount of effort. By fixing 1/5 of your “challenges”, you fix 4/5 of your losses. Now that’s leveraging your time! And, once you’re there, it means there’s not much point to working on the other 80%.

And the last one is the big one. As we’ve just started a new year, you’re probably looking at several areas you plan to improve. You have resolutions and goals that you’d like to meet in the coming year. But what if you could pare down your goals to a few steps most likely to get you where you want to be?

80/20 and You
Let’s start with a pretty easy application – your To Do list. Take it out, and look it over and pick out the 1 in 5 things that will give you the biggest returns. Focus on those, and forget the rest. I know this seems extreme, but it works. Once you have your top 20% done, you can re-work your list and get into the next part, or maybe new things will come to the top of your list.

Keep in mind this is a rule of thumb. It won’t always work out – maybe you have eight things on your To Do list. Or you see that 40% of you work creates most of your productivity. You will have to determine how it fits in your life. Here is an example on how to apply it to your finances. The principle is critical though: a minority of your efforts create most of your results. This demonstrates leverage and inverse leverage – you don’t want to spend half your time getting 10% results!

So make this a core philosophy, and streamline your life. A little efficiency at the right place can make a huge difference!

Desire and Discipline – What Motivates You and Gets You Out the Door?

I’m going to start with a story from Trading in the Zone by Mark Douglas. He talks about when he decided to take up running again, and how hard it was at first. Often, he’d let the TV or the weather keep him from his run. He wanted to be a runner again, and found he needed to discipline himself very strictly to keep running. He would set goals, and make himself go out daily to reach them. By the end of the summer, he had reached a big goal and was worried that he’d let down without new motivation. But a funny thing happened: he got up the next day, goal-less, and ran anyway…

It seems we have two main motivators: the carrot and the stick; greed and fear; desire and discipline. Call it what you will – you are either led or pushed.

What Mark Douglas talks about is moving from discipline – and pushing himself out the door each day – to desire. He then believed himself to be a runner, so he did what runners do: run. He didn’t need to push himself, so did it more often and with a more positive outlook in the process. In What’s Your Why?, I looked at building a future desire that would pull you forward. Once you know what you want, and you believe you deserve it, things become much easier.

What Motivates You?
So take the time to look at your motivators. Both desire and discipline will get you where you want to go, but one will be much more enjoyable. Let’s imagine two businessmen – one is worried about the economy and his financial security, and the other is excited about his new business idea and the possibilities success will open up to him. Which will make more money? Which would you rather be? Who will get up in the morning, happy to get started on the day? Who will talk about his business more, and find more possible ways of success?

How about you? Where are you?
1. Are you happy to get up each day, or do you have to push yourself?
2. Do your goals or resolutions excite you?
3. Would you like to continue to do what you do if you weren’t paid for it?

What Is Your Desire?
Discipline can be a great way to get started. But your passion, your energy, your creativity – comes from desire and doing what you love. If you’re already there, great. But if not, how can you make the move from ‘doing what you have to’ to ‘loving what you do’? Maybe you’ll have to look for a new circumstance in your life. But maybe you’ll find a way to love what you do, love the process, or just take pride in doing your job well. What is your desire, and how can you harness it?

New Year's Rituals?

Tonight, as a part of our New Year's festivities, we'll be having a bowl-burning ceremony. The idea is to add meaning to this rotation of the sun, which ends this rotation of the earth around the sun. Really, it's just another moment in time. But since we have decided to end the year at the end of this day, it seems like a good time to add more meaning.

Adding Mythic Meaning
So we'll add mythic significance to today with ritual. We'll prepare a bowl with sand, write down any part of the last year that we don't want to carry with us into the next year, and burn it. Let it go up in smoke, and let the feeling go from our minds and bodies. Let go of these things we don't want to carry into the new year...

Then we will write a letter to ourselves / to God, asking and giving intention to what we would like in the upcoming year. We will strengthen in our minds what we want, and give ourselves a written reminder - that will be delivered in six months. Thus we have put it into our mind now, and added a level of accountability or a reminder for ourselves halfway through the year. I might also go into the steps I outlined in my New Year's Resolution post - breaking my plans into quarterly and monthly goals to check in on.

What will others do?
Anybody else out there in Blogland? What are your plans for today? What will you do to make the passing of the year more mythical and significant? If you have a similar idea, how will you enact it? If you have something completely different, what will you do?

Please post a response, and let us know how you will 'bring in the new year'!

New Year’s Resolution – To Be Debt-Free in a Year

New Years is always a time of introspection and resolutions. I’m currently snowed in with my family, thinking about the last 12 months, and the next 12. It’s been quite a year, but I want to focus forward. It’s been said that the best way to predict the future is to create it! How do we do that? By following our goals and resolutions. It’s a good idea to make personal, social, health, and financial resolutions, but I’m going to focus on the financial.

With a new child, my main intention is to create a great environment for him to grow up in. At first, I thought I meant enough toys and friends, room to play, and a clean, safe place to live. The more I think about it though, the more it comes to mean getting my finances together so I have lots of stress-free time to spend with him.

I resolve to create financial freedom for my family.

Hmmm. This resolution fails on several levels. First and foremost, a resolution must be inspiring, achievable, and measurable. This is certainly inspiring, and makes me want to get out of debt, but what is financial freedom, and how do I measure it? On what time scale is it achievable? So, looking at that, and the mention of debt makes it more clear what I’m aiming for.

I resolve to be free of credit card debt by the end of the year.

Now, let’s put it to the test. It is inspiring, because the feeling of not having to deal with debts, credit card bills, and phone calls when I’m late is a really great feeling. I can really latch onto that feeling to help keep me going when I start to lose focus. Is it achievable? It can be, if I follow through and stick to the program. And that’s why it has to be inspiring – to keep me on the program through the ups and downs.

Now, is it measurable? Certainly. Let’s say I have $10,000 of debt – that’s very measurable. I have to pay off $10,000 this year. But to keep on the program, we have to have a program. So we’ll break it down to $5,000 in six months, or $850 a month. Now we take those monthly goals, and put them on the calendar.

Debt, January 31^st: $9,150

Debt, February 1^st: $8,300 all the way to

Debt, December 31^st: $0

The Way to Accountability

Now I know how to check on myself. Every month, before I turn the calendar, I can look at my goal and see how I’m doing. I will have monthly reminders, and my inspiration of a debt-free life to keep me going. The calendar creates accountability, and by putting it up, and telling my family about it, I create more accountability.

This is the last step – accountability. What happens if I fall off a little? Will someone call me on it, or do I just ignore it? Do that, and it will be easier to forget next time, and soon I’ll be right where I started next December.

But by following my five parts of a good goal, I can make it. Of course, this isn’t a replacement for hard work, it’s a way to direct my hard work. I just need to keep in mind:

1. Inspiring
2. Achievable
3. Measurable
4. Steps on my Calendar
5. Accountability

What’s Your Why? The Importance of Finding Meaning in Your Life

This is my first post, and first put up at http://www.getrichslowly.org/blog/2008/12/28/whats-your-why-the-importance-of-finding-meaning-in-your-life/

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You’ve heard the phrase, “A bird in the hand is worth two in the bush.” I’ve often wondered about that — should we really settle for half the return just to have a sure thing right now? It could be argued, and convincingly, that our love of immediate gratification is why so many people have so much debt now.

Of course, what are those “two birds”, so elusive off in the bush compared to something concrete in your hand now? How do you know you’ll get them? In other words, as you’re looking at that new LCD HDTV, what is competing for your money in your head? Without a solid goal, a vision of the future, there is no reason not to buy that latest toy with your credit card. What else are you going to use the money for?

The power of Why
This is why each of us needs a convincing ‘Why’. We need to have a vision of the future so compelling that we can see it even more clearly than the new toys in front of us.

My Why is passive income that can support travel. My mantra is: “Financial Freedom is the ability to travel for a year and come back in a better financial situation than when I left.” That means I could travel another year and implies repeatability. It conjures visions of African safaris, Thai beaches, SCUBA diving, and hiking around the UK hand-in-hand with my family.

This knowledge helps to guide my financial choices. I assume that I could earn 12% on invested money. This means that every $100 I invest could bring $12 a year, or $1 a month. When I look at a $700 TV set, I think, “That could be $7 a month for the rest of my life.” I repeat my mantra — remember my Why — and I don’t buy.

Developing a Why
What’s your Why? What compels you to get up and go to work each day, to do things you don’t want to, and to put up with your boss? Everyone needs some motivation to keep on track, and it has to be a strong image. What is yours?

If you can’t close your eyes and see your Why in detail, now is a good time to get clarity. Ask yourself the following questions:

• Where have you been happiest?
• What were you doing?
• When you close your eyes and picture yourself incredibly happy, what do you see?
• What makes you forget yourself for hours on end?
• When do you feel best about yourself and your surroundings?
• What do you talk about excitedly?

Desires can be subtle. Maybe you have fond memories of staying somewhere. But it might actually be the time with friends that made the place special. What aspect really touches you?

Find some quiet time to get clear on what moves you, and then visualize it until you can see this compelling future as clearly as your car. You’ll know this is working when you look at something you thought you needed and instead see your Why.

The next step
This is a demanding, complicated world. It takes a lot of work to get good at something, or to get something you really want. Dave Ramsey says, “Live like no one else, so later you can live like no one else!” Why work hard when you could just watch TV? Why save for some undetermined future when you could watch it on a bigger TV?

Most successful people have spent thousands of hours perfecting what they do. They have a vision of the future and their place in it. Otherwise they wouldn’t have bothered with all the work it took to get there. Yet most successful people would tell you that they loved the process — the challenge, the passion, the fun! They’ve found a vision of the future that compels and excites them, and that’s the difference. That’s why they are where they are.

In fact, that’s why we all are where we are — our previous beliefs and vision of the future. Do what you’ve always done, and you’ll have what you’ve always had. Create a vision that moves you to do things you’ve never done before, and you’ll find yourself in new, wonderful places. Once you have a Why, no matter how unlikely, the How becomes a lot easier and more enjoyable.

What’s your Why? What do you visualize in the morning to get yourself going? What motivates you to do everything you do?

Photo by René Ehrhardt, who has many amazing images on Flickr.