Prioritizing Success

   Have you ever felt your day just get away from you? Looked down at the clock and realized it's almost quitting time, and you haven't even started those things you planned on.

   We all have days that seem to get away from us. When our best laid plans are derailed just minutes after we open our eyes.

   Losing a day's worth of productivity hurts. But for many people, those endless to-do lists at work and at home are a fact of life. They find themselves caught on the treadmill of other people's priorities. Constantly running in place, and all too often, leaving their enormous potential untouched.

   There's no difference between you or I, and the best in our fields. So how do they do it?

   How do top performers retain their focus day after day?

   Top performers know that to remain the best in their field, they need to focus on delivering value. Day after day, month after month, year after year. The moment they stop producing the results they are paid for is the moment they slip off the top of the podium.

   We’ve looked at this before. Top performers know what they need to do to create massive value. But that knowledge isn’t worth much if we can’t escape the prison of those endless to-do’s.

   What practical steps can you take to keep yourself off the hamster wheel, and focused on the things that matter to you?

Bucket your Task List

   The first step in overcoming overwhelm is identifying what actually needs to get done.

   We’ve talked about being 1% better every day, so let’s use 1% of our time to get clear on what is important. This 15-minute planning exercise is deceptively simple, and alarmingly illuminating on what is important.

   First, decide on the 3-5 projects and tasks that are important for you to get done. It’s important to limit this number to just a handful, to really reap the benefits of your mind focusing on just a few problems. In a corporate setting, these priorities should be aligned with your KPI’s. The better you perform on your priorities, the better your performance, and the more value you add.

   Once you have your priorities, take a look at your To-Do list. Assign those To-Do’s to a priority. I prefer to simply number my priorities (more on this next).

   For every given priority project (numbered 1-5), you may have any number of tasks and to-do’s assigned. That simple structure will help you understand what you need to do now to move the needle. Of those priorities, you will also be able to look at which one is most important / valuable. If time is a constraint, focusing on the most valuable activities will still help you deliver.

   As you go through this exercise, you will undoubtedly come to the same realization as everyone else. You have more items on your To-Do list than you can reasonably allocate to your priorities. These tasks are distractions, and the reason that most people fail to realize their potential. Spending your time and efforts on tasks that don’t impact your priorities means that you are working on someone else’s priorities. For these tasks, simply delete them from your task list. You’d be surprised about how infrequently someone even circles back on those items.

Prioritize your Priorities

   You know what you want to get done. You’ve identified the 3-5 priorities that you have already. Now it’s simply a matter of scheduling the time to work on it.

   Make sure you have dedicated blocks of time in your calendar where all you will work on is those priorities. I prefer sending myself meeting invites, and sitting in a conference room alone. This gives the clear message to everyone else that I am not to be disturbed.

   Other strategies are to put on your out of office, or simply exit out of email and internal chat programs. A cautionary note re: going AWOL - some companies and bosses will take offense to not being able to reach you at all times. Make sure you set clear expectations in those circumstances, to ensure that you are measured on your results, not your attendance.

   As you begin to solidify your planning practices, you will undoubtedly be surprised by two things. The first, how incredibly efficient you can be when you have uninterrupted moments to get your work done. And the second, is that despite your best guesses, everything always takes longer than you planned. Make sure you’re setting aside enough “extra” time to close off anything you don’t get squared away in your original focus session.

Prioritizing in Practice

   When I approach this, I always start with 3-4 priorities for the week. Deciding on what my most important, or most valuable, project is for the week, I label that #1. #2 for the second most important, and so on and so forth.

   Then I do the exercise of assigning those numbers to my To-Do list. Since my lists are all electronic, anything that doesn’t get assigned a number gets deleted. While that might seem extreme, I have learned that even just seeing other people’s projects on my task list drains away valuable mental energy.

   Then, I take my calendar, and start scheduling off time for me. Anywhere from 45 minutes to 4 hours at a time. But the sweet spot is usually between 60-90 minutes. Any longer than that and I will inevitably distract myself with email or other such distractions.

   Starting Monday morning, I assign priority 1 to my first time block, eventually moving to a block for 1 or 2. Then just priority 2. Then 2 or 3, always allowing an extra “shared” block of time for work that spills over. This keeps me accomplishing the most valuable tasks first.

How to Become a 1% Better Version of You

   What separates the elite from the rest of society?

   While the list of results speaks for themselves, the real question is what are those top performers doing that the rest of society isn’t?

   No matter who you look at, the best of the best all hold a similar set of characteristics. And thankfully for everyone else, these are learned skills. There’s no advantage for introverts over extroverts. No nature vs. nurture. Even genetics rarely plays a role. No matter where you look, you can find people embodying a wide array of personality traits, each sitting at the top of their chosen fields.

   What’s the secret then?

   The most successful, those who achieve the most with their lives, all share 2 critical skills.

They know what to do.

   The top achievers in our society understand what they do to add value to others. Whether that’s setting corporate vision, building new products, or throwing touchdowns. A top performer understands what they do to drive success for their organization, family, or team. And then they double down on fulfilling those key objectives and critical activities.

   Look at what you are currently doing that adds value. Everyone does something of value. Whether that’s in your day job or at home with your family, everyone has the opportunity to improve the world around them. 

   After you identify the key actions and activities that you participate in that drive value, increase your personal worth by spending more time doing them. For example, the top performing sales people know that their value is increased exponentially by talking to potential clients. The more time spent speaking to clients, the better your results. That means less time spent on emails. Less time cold calling prospects. Less time attending internal meetings.

   By refocusing those time savings into the true value-add conversations, a top performer can dramatically increase their results.

   We all have tasks that need to be done, but really aren’t that valuable. Identifying those tasks, and either doing them faster, or delegating those tasks (if possible), frees up your time to really focus on the rain-making activities.

They have a relentless drive to improve.

   The other universal trait of the uber-successful is their relentless drive to improve. Not just improve the world around them, but most importantly, to improve themselves. Reading books, taking courses, attending seminars. Anything that they can do to improve, even marginally, a top performer will do. And this is important. The improvements might not be dramatic, but the results certainly are. 

   The difference between #1 and # 100 in almost any activity is less than 1%. 1% slower, and you start at the back of the race-track line up. 1% slower and you might not even qualify to compete.

   But the flip is also true. If you improve yourself by just 1%, you will make huge strides over and above the competition.

What does 1% look like?

   There are 24 hours a day. That’s 1,440 minutes. You have them. I have them. The best in your chosen field has those same 1,440 minutes. 

   If you want to approach the top in your field, start with using just 1% of those minutes to improve yourself.

   The most common objection to self improvement is the lack of time. So what is 1% of those 1,440 minutes each day?

   14.4 minutes.

   For 15 minutes each day, you can become 1% better. 

   For 15 minutes each day, you can move from the middle of the pack to leading the pack. 15 minutes, 1% of your day, to change your life.

   This month, spend 15 minutes a day, only 1% of your time, doing something to move the needle forward. I can guarantee that after just 1 month you’ll already see the results.

   What is that 1% for you? 15 minutes a day playing an instrument? Reading a book? Jogging around the block? Learning a language? Settle on something that will make you better. A better contributor at work, a better spouse, or just better to the person you see in the mirror.

Indexing for Financial Independence

   How do you plan on improving your financial life?

   No matter your financial goals, increasing your wealth is certainly on the top of that list. But striking it rich by stuffing cash under the mattress isn’t going to work.

   Where then should you be putting those hard earned dollars, to make them work just as hard for you?

   There are a myriad of ways to invest, from real estate to blockchains, commodities to collectibles. But, among the possible investments, there is one type of investment that I recommend more than anything else. Stocks. In specific, index funds.

What is an Index Fund?

   An index fund is a collection of financial instruments, stocks and bonds, that is designed to mimic a financial market. Simply put, an index fund is just a tiny piece of an entire market.

   These index funds come in the form of either mutual funds, or exchange traded funds.

   One of the most popular index funds to be mentioned is the SPY ETF. This fund is composed of all the stocks held in the S&P 500. The S&P 500, as a refresher, is an index of 500 of the largest US companies (by market capitalization). This has several implications for investing, which help with your long-term wealth accumulation. 

Diversification

   One of the keys of investing for most people is to ensure they are diversified. While there may be some rare exceptions who have picked winning companies time and again, they are precisely that, the rare exceptions. When discussing your financial health, your dreams, your future, we don’t leave that to a lucky roll of the dice. 

   Index funds solve this dilemma, by allowing you to purchase a broader section of the market. Depending on the index fund chosen, you own a small piece of all the assets. In the above example with an S&P 500 index, you would own a piece of each of the 500 companies on the index. That means you own Tesla, Apple, Microsoft, Amazon, Johnson & Johnson, etc. This one investment lets you buy into technology, consumer goods, mining, oil and gas, and many other industries. 

   Diversification of this nature helps you stay away from any one industry. If a major event hits the oil and gas industry, much of your investment is stored elsewhere.

Picking a Winning Stock

   A common rejection of the indexing idea is that picking the right stock, at the right time, and you will achieve far superior results. From a math standpoint, those people are absolutely correct. If you bought Amazon before it became the company it is today, your wealth would have grown exponentially. The same with Apple, or Netflix. 

  But, for every winner, there are a dozen other equally as spectacular failures.

   How would you know that Netflix would become what it is today, when Blockbuster was the household name 20 years ago? Blockbuster certainly had the industry connections, they had the brand recognition, and they had the financial resources to pull off a streaming service. Would you have made the bet that a mail-order DVD rental company would become one of the most prominent media companies in 2021?

   Index funds, on the other hand, hold a small piece of many assets. That means you would have been an investor in those early days. Along with holding assets in many other companies. Those wins would have been your wins. Those returns would be driving the returns in your portfolio. 

Barriers to Entry

   Index funds, particularly mutual funds, have one of the lowest barriers to entry. If you wanted to buy shares in the same 500 companies as in the S&P 500, you would need tens of thousands of dollars to invest. 

   This financial barrier has been somewhat reduced with some brokerages now offering fractional share ownership. But, the complexity of buying and managing the market weighting of 500 companies would be just as intimidating. 

   The complexity and the financial barriers are both solved by index funds. Now, anybody with a couple of dollars can invest in the entire market.

The Easiest Winner - Index Funds

   Perhaps the most important reason why I recommend index funds for every investor is their simplicity. Sure, you gain some diversification advantages. And, you own a small piece of the winners. But those aren’t the main reason people don’t get investing right. 

   The main reason people make financial mistakes is the confusion. Too little, or too much information, and people become stuck. Paralyzed by the indecision, they often make the most costly decision of all, the cost of inaction. In these situations, you need less to do more with. Less complexity in your financial plans, and more investments driving your financial goals.

   No Safety Deposit Box for your gold bricks. No warehouse for your barrels of oil. No trouble with the renting tenant. And no listing that precious painting for auction. Index funds are so easy, anyone can use them.

   Buying into an index fund is easy. It’s simple. Implementing the right system automates all of this so you invest and keep investing without even thinking about it. You too, can use index funds to automate your path to financial independence.

What’s Your Number?

   When you think about Financial Independence, does it feel like you are standing at the bottom of a seemingly insurmountable mountain? 

   Looking at financial independence as the ability to live off your own financial resources for the rest of your life sets the bar quite high. Essentially, you’re trying to come up with your “never work again” number.

   But, we need to work.

   Abraham Maslow published his thoughts in a widely taught and cited paper “A theory of Human Motivation”. Since the time of publishing, Maslow’s Hierarchy of Needs has only grown in popularity, not for scientific reasons, but as a representation of what people see in themselves.

   Maslow’s Hierarchy of Needs:

Image Credit: Wikipedia

   Work is an essential part of our identity. It provides us a way to meet our needs - belongingness, accomplishment, and fulfilling our potential. Without work, we’d be lost. 

   But work doesn’t need to be a traditional 9-5 shiftwork. Work is ultimately a purpose, a reason for acting, a reason for living.

   Of course, for many people, this view of work is an esoteric, almost mythical story. The idea of work has been corrupted by a sense of duty. You must work, because that is the only way to earn enough to fulfill the first two levels of the hierarchy; food, shelter, safety. 

   To grow beyond those first two levels, you need to know those are taken care of. To do that, you need another financial goal. A base camp partway up the mountain of financial independence.

   You need a mid-term financial goal, a number that covers your food, shelter, and safety, so that you can focus on growing into your full potential.

   Look at your monthly spending. How much do you spend each month on: 

  • Housing (rent or mortgage including property taxes)
  • Food
  • Utilities (Gas, Water, Electricity, Internet, Phone)
  • Healthcare (Medical bills, Insurance)
  • Transportation

   These are your basic financial needs. Having these covered will allow you to focus on other of life's priorities.

   This number is extremely important for two calculations, your emergency fund, and that base camp of Financial Security.

Emergency Fund

   An emergency fund is important for everyone’s financial security. To be able to cover the unexpected, so you don’t get side-tracked from your true financial goals.

   Take the cost of your basic needs, and multiply by a reasonable period of time. 6 to 12 months should be sufficient, in case of job loss or another type of emergency.

Financial Security

   Your basic needs are significantly less than the cost of your total lifestyle. Understanding what those needs are will help you plant your flag at base camp on your financial journey. With those list of costs, multiply by 12 to find your annual expenditure, and divide by 6%. This gives you a target for Financial Security. 

   Take Sally’s example. She needs $3,000 / month for her basic needs. Her calculation would be:

$3,000 * 12 / 6% = $36,000 / 0.06 = $ 600,000.

   A fund of $600,000 invested in a low cost index fund would provide Sally the financial security she needs to never worry about food, shelter, or safety ever again.

Why 6%?

   6% estimates the total market return of a low cost index fund. Financial Independence looks at lower numbers, like 4%, to determine the appropriate levels of withdrawal to ensure you won’t run out. But Financial Security comes first. The Financial Security fund still expects you to work, to earn more, to be productive as you grow towards your potential. 

   By now you should have a few financial goals in place. How much you need in an emergency fund. How much you need to experience some financial freedom. How much you need to achieve financial security. And ultimately, financial independence, how much you need to live life the way you want to, without ever needing to work again, if you so choose.

   What are your numbers? Imagine what your life will look like as you start to build these financial foundations. Imagine all you can experience, all you can do, all you can become. That is a life worth living.

Will You Be A Winner?

   Tonight’s the night, the big game. Super Bowl LV (55). Where football fans, and non-football fans alike all crowd around watching two teams smash into each other. Fortunes are made and lost with each touchdown and fumble.

   Kansas City Chiefs star quarterback, Patrick Mahomes has a 450 million dollar, 10-year contract. While Tom Brady has a 25 million dollar payday (plus bonuses) from his Buccaneers contract.

   But these aren’t the first star athletes to be paid such incredible sums. Time and time again, the rich and famous have demonstrated that even the mighty can fall, filing for bankruptcy after they lose it all.

   What mistakes are being made that cause societies top earners cheques to bounce?

   As with most things, education plays a pivotal role in the eventual success or failure. That is why it is so perplexing that basic financial education is lackluster in its delivery, if provided at all. A few simple rules could have averted all of those financial meltdowns.

Up and Down

   Jim Rohn perhaps put it most eloquently when he said: if your outflows exceed your incomes, your upkeep becomes your downfall.

   Or more simply, if you spend more than you make, you’ll soon go broke.

   This is perhaps the cornerstone rule of achieving financial freedom - don’t spend more than you make.

   Of course, that isn’t usually the problem when we’re in our prime. Sports superstars like Mike Tyson can attest to that. Each fight was worth millions to his bottom line, and in his prime those fights were coming fast and furious.

   But all good things eventually come to an end, and when Mike Tyson retired, that income was significantly reduced. As we all witnessed though, Mike’s lifestyle didn’t scale back a few notches. His upkeep became his downfall.

   That is the single biggest reason that most people fail to achieve financial freedom.

   As you become more established in your career, you’ll start earning more. But at the same time, life is likely growing with you. That promotion at work coincides with the birth of another child, and all of a sudden you need a bigger house. And a bigger car. But not just any bigger car, you need something worthy of your new title. Something shiny, with heated leather seats and a brand name that turns heads.

   This cycle continues your entire life. Constantly up-scaling your life every time you move to a higher paying job or position. It’s normal, and it’s natural. But if your lifestyle creep keeps pace with your earnings growth, you’ll soon begin to realize something. Freedom isn’t achievable like this.

   When your outflows grow at the same rate as your income, you can’t ever scale back on your income. That means you won’t ever find the freedom that was promised. You’ll find yourself stuck in the same situation that millions of people in the richest countries in the world are in. You simply cannot afford to retire.

   The solution is to find the elusive state called balance. Balance between the needs of now, and the needs of the future

Balance the Sacrifices

   To find that elusive balance, you need to decide what sacrifices you are willing to pay. Do you sacrifice today’s comfort for freedom tomorrow? Deciding to what extent you are willing to pay that sacrifice will determine how much freedom you have in the future. 

   What percentage of today’s earnings will you put aside for tomorrow? Depending on your own unique situation, those numbers might look very different. But one thing is certain, the more you sacrifice early, the more freedom you will have years from now.

   You want to be a winner. But, what are you willing to sacrifice for that victory?

The Path to Success

   How will you achieve this year’s goals? How will you make this year your best year yet?

   Setting goals is a process of laying the plans that carry you outside of your comfort zone, to a new level for you. That’s the point of goals. To take you where you’ve never been before, to show you what you’ve never seen before, to make you better than you were before.

   But if you’ve never been there, how will you get there?

Follow A Path

   No matter what you desire in this world, someone has had it all before you. 

   Anakin had Obi Wan Kenobi. Luke had Yoda. Katniss had Haymitch.

   No matter where you are in your journey, there is always someone who has walked those roads first. With the abundance of information out there, it has never been easier to find those who have walked the roads ahead of you.

   How do you achieve something you haven’t had before? Find someone who has it. And learn from their ways.

   A quick search on the internet will reveal an enormous list of resources, some credible, most just noise. That quick search will have revealed a maze with countless starting points, just as many dead ends, but just as importantly, countless paths through to the other side as well.

   And that brings us to the second critical element to achieving more. Sticking with the path you choose.

But, Only One Path

   As you search for those who have walked the streets ahead of you, you’ll be confronted with many “guides” that can promise to take you to the promised land. All of these guides have a selfish interest in helping you succeed.

   Once you find a guide that resonates with you. One who’s path leads you to where you want to go. Stick with that guide. Through the trials by fire. The struggles, the heartaches, the close calls and near misses that meet you along the way. 

   It’s during those hard times that the sirens call from a new guru or guide becomes especially dangerous. The lure of an easier path is seductive, especially to one going through pain and suffering. Young Anakin left his path during one such challenging period. And the result of following too many different paths led him straight to the dark side.

   Once you have your path, stick with it. Through thick and thin. Lest you find yourself lost, following too many guides leading you in different directions. Wandering tired, alone, nowhere that you want to be.

The First Step

   Here is where reality sets in. 

   Obi Wan Kenobi isn’t flying to your doorstep to take you on a grand adventure. The Capitol isn’t summoning you to fight for honor and glory.

   Unlike the stories told around campfires, there is nobody about to drag you out of your comfort zone and towards the person you were born to be. 

   If you aspire to greatness. If you want more than you have. If you were born to be more than you are now, you must declare it. 

   Someone will reach the goals you set. Someone will become the person you aspire to be.

   Why not declare that someone should be you? Volunteer to pay the price of success. And with both feet, take the plunge into the world that awaits your greatness.

 

How To Apply This To Your Story

   Many people at the start of the year have improved fitness goals, so we’ll use that example. But, keep in mind, the steps can work for any goal you set.

   Find a gym, a coach, a routine that works for you. There isn’t a one-size fits all approach. For our example we’ll use a “train at home” style workout, P90X.

   Follow the P90X path. Sometimes it will burn. Sometimes you’ll want to quit. But stick with it. Don’t swap it out on week 2 for a different 5x7 app. Or a new gym membership. Once you find something that works, stay the course. 

   Getting mixed up in 4 different workout regimes, with the same number crash diets is a sure way to overwhelm yourself. And following multiple different paths to the same health goal will ultimately lead you stumbling into your future self 6 months from now in the exact same body you have now.

   Once you know the path that will work for you and your lifestyle, begin. Success starts with action. If you want to hit that health goal, start where you are, doing what you can, now. If you do that, and stay the course for at least the next 90 days, then I guarantee in 3 months you’ll look and feel like a whole new you. 

   It’s the path to success. Will you walk it?

Raise The Roof On Your Economic Potential

   Are you being paid for the value you bring?

   Every year, companies evaluate their staff, and look at the pay scales that employees are graded on. Most jobs, and companies, will be paying based on a pay band. 

   These pay bands are reflective of the market rates for a certain set of results. 

   The more results that you can generate, the more value you have to the marketplace, and the more money you can demand. This principle helps govern your earnings, whether you’re looking for a cost of living raise, or something more substantial. 

How do Raises work?

   All corporations plan out their payroll costs in advance. While this helps the finance team prepare for the future, it also led to a side-effect that too many people have heard. 

   This side-effect can be explained simply as: “It’s not in the budget”. 

   How many times have you heard that in your own careers? Whether it’s a new project, or a raise, this line is used as an excuse, a justification, and an explanation all in one go.

   There’s only one problem with that sentence. It’s a lie.

   You see, all companies have the ability to deviate from the budget, especially for the right reasons. You could ask any company if they would be willing to spend one hundred thousand dollars to make a million dollars. The answer would be a resounding yes.

   Not once would someone say, “Hold on, let me check the budget.”

   It’s not a question about what the budget has in it, or what the pay band is. If the value is there, every company would be happy to pay for that value.

   The secret then is how do you increase your value? And how can you demonstrate that to the marketplace?

How Do You Increase Your Value?

   There are three key areas that help you increase your value. Each of these three areas will help you produce more value, and thus become more valuable to the marketplace.

Attitude

“Attitude is everything, so pick a good one.” ~ Wayne Dyer

   How you approach a situation, the attitude you adopt, will play an unprecedented role in generating results. A person with a positive attitude not only is more pleasant to work with, but that positivity will even help you overcome obstacles more easily. 

   The best part about attitude is that improving it is free, and instantaneous. 

   Take a look at your attitudes surrounding work, life, family, and money. Where can you turn your thoughts into something positive, and increase your successes?

Knowledge

   Knowledge is power. It’s also extremely valuable. There is a reason that doctors and lawyers get paid so much. It’s because the knowledge they hold is valuable.

   In every profession, learning how things work will make you more valuable. Whether that’s new systems, new processes, or new ideas. Learning about your field will help you command a higher price tag to the marketplace.

   Education is an on-going process. If you want to be more valuable, and thus paid more next year, you need to increase your knowledge this year. Every month, every week, every day, you need to strive to be better than you were yesterday. That is how you will continue to increase your value and raise your earning potential.

Skills

   While knowledge might be learnings, skills are a subset of practical wisdom that you can apply for better results. The primary skill that everyone should focus on is communication. The ability to communicate effectively is alone with the price of admission. 

   Developing skills like communication, time management, and prioritization will help you produce exponentially better results. Those results will in turn drive up your value to the marketplace.

How Do You  Demonstrate Increased Value?

   Becoming more valuable is only half the battle. You also need to be able to demonstrate that value to the marketplace. 

   Showcasing your skills, attitudes, and knowledge can be tough though. While some knowledge, like a law degree, can be verified from an academic institution, the vast majority of your education will come from other places.

   The books in your library. The seminars, conferences, and courses you’ve taken. The experiences you’ve had.

   Demonstrating a positive attitude is again something that is harder to show-off. For this one, you need only to approach life with a positive can-do attitude, and your reputation will take care of the rest. People are quick to vouch for someone brimming with that can-do-ness.

   But for your employer, most of the time those nuances are taken for granted. Demonstrating those qualities aren’t always enough. In those cases, you need to determine what value-add activities you perform, and showing how you produce a positive return for the company.

   Take a look at your work. Are you generating revenue for the company? If so, look at your billable utilization. The more hours you bill, the more money the company makes. If you can deliver more value, you can be billed out at a higher rate. As you grow in your career, how much more can you make for the company?

   Answering that question will help you tremendously in any compensation discussions, as you can show how your growth and development actually makes the company more money.

   If you’re in a non revenue generating role, look at the projects you are undertaking. What is the impact of your efforts? A project that reduces the costs for a company is just as valuable as generating revenue. Reducing expenses helps grow the bottom line.

   Learn what value you bring to the company. Understand how the work you do each day helps drive success for the company. Once you know this, you can shine a spotlight on the areas that you are valuable. 

   How do you raise the roof on your economic earning potential? 

   Become more valuable, whether it’s through a better attitude, additional knowledge, refined skills, or a combination of all three. And then learn how your efforts are creating value. Once you can explain that, you can command a higher economic premium for your efforts. 

   Success is a journey. One you don’t just go through, one you grow through.

Racing up The Ladder: Becoming More Valuable at Work

Ready to climb the corporate ladder?

   Are you worth your paycheck?

   Every person is paid for the economic value that they bring. While nothing is more visual than a salesperson earning commissions for bringing in a new deal, the same principle applies to every worker. That salesperson can’t close the deal without the right products and services on offer, the right tech setup to enable the deal, the right finances, the right team. 

   Everyone is part of a larger mechanism, one that thrives when everyone excels at their chosen specialty. 

   But how do you excel at what you do, and get paid for it?

Do More of What Matters

   Every day you do something valuable. But, you most likely also do some low-value activities too. Attending meetings that you shouldn’t be at. Answering unimportant emails. Taking long-winded phone calls.

   Those low-value activities detract from the value that you bring to the organization, and thus detract from your value to the organization.

   Do you want to be more valuable, to demonstrate that you are worth more than your current paycheck?

   The answer is simple - find the activities that are high-value, and do more of them. Increasing the amount of time spent on high-value activities will increase your value. 

What Activities Matter?

   The big question that comes up in my team when I recommend to focus on high-value activities is always; what activities are high-value?

   The answer is of course different for everyone. For a salesperson, high-value is spending time talking with prospects. While low-value is actually dialing the prospects. The difference? A thousand dead-end calls won’t stack up to one good conversation. 

   Or a consultant - delivering a proposal to a client is high-value. Recording time-sheets or answering emails, those are low-value activities. Too much time spent on those will erase the gains made by billable time on a project. 

   While every organization has a mission and vision, every department has KPI’s (Key Performance Indicators) that drive that goal. Understanding what your department's KPI’s are is essential to actually delivering that value. 

   Is your work directly related to a KPI for your department and/or company? If yes, it’s probably high-value and you should double down on that. If not, it is likely busy-work, and ultimately detracting from the value you could be bringing.

But, My Priorities Aren’t My Own

   The biggest hurdle that needs to be overcome, especially by those early in their careers is that they often don’t have a say in what they do. Those roles where you have to “put in the time”. 

   We all have bosses, and sometimes our bosses tell us to do things that aren’t driving value. Nobody is perfect, right?

   What should you do in those situations?

   Sometimes, you just need to suck it up and get it done. But do it quickly, so you can get back to the real value-add activities.

What Are You Worth?

   Decide what you want to be paid. Maybe it’s $100,000 / year. If that’s the case, you need to generate $50.00 per hour in value for the 2,000 standard working hours each year. 

   If you can do that, you’re already worth 6-figures!

   Now look at where you’re actually spending time. Did you go for an extended coffee break? Minus the cost of those minutes. Checked Facebook/Instagram? Give some of that 6-figure salary back. Attended a pointless meeting? Sign the check back to the company.

   And those tasks over which you have no control? They cost you as well. To make up for that, you need to have a few hours where your value is far greater than your desired rate.

   You are paid for the value that you bring to your company. Want to race up that ladder, and become more valuable at work? Spend more time on the most valuable activities, the ones that drive success for the business or department KPI’s.

   Just remember, for every minute that you spend not delivering the value you want to be paid for, you need to make up. Either in higher value activities, or by working more hours. And if you want a life outside of work, I’d focus on those higher value activities.

   If you want to be more successful in your career, make sure you spend the most time possible doing the things that prove you’re worth more. The more value you add, the higher rates you can charge. And that’s something you can take to the bank.

Voting for Better Returns?

   In case you missed it, one of the most powerful economic nations in the world is having an election. Stack that on top of an existing global health crisis, mounting racial tensions, environmental concerns, and you have a potent mix of fear and uncertainty.

   For our American friends, what does your vote mean for the long term future of the economy? And for those of us who aren’t casting a vote in the 2020 US Presidential election, what does the outcome mean?

   Certainly looking at the stock market the past week has shown one thing for certain: people don’t know what to expect. And that fear and uncertainty shows in stock prices spiking and plummeting all within the space of a few hours.

What Happens if the “Other Guy” Wins?

   No matter which political side you’re on, there is always “the other guy (or gal)”. And the blessing of democracy enables us to choose our leaders - which also means that the one you’ve pushed your chips in on might not always come out on top. 

   And when that happens, and the other guy wins, what happens then?

   The answer might not be that Hail Mary you were hoping for.

   The truth is, no matter who wins, the president of the United States, arguably one of the most powerful people in the world, has very little long-term influence on the stock market.

What CAN the President do?

   In times of crisis, the president exercises some very moderate influence in the form of economic relief packages. We saw this in 2008 with the big bank bailout. And we’re seeing the same thing now with COVID relief being dispensed to businesses and individuals alike. That extra cash is propping up the economy, but not in as substantial a way as many people would like to think.

   Outside of some short term relief, there really isn’t that much that the president can affect. Which means all the chest beating about how “great” someone is for the economy as a whole is just a marketing gimmick.

Who Does Control the Economy?

   If it isn’t the president, who is it that controls a nation’s economy?

   The short answer is nobody, and everybody.

   The economy is a complex system, made up of the economic productivity of all the parts. While some parts, like small businesses, may be suffering, other parts, like big tech, are thriving. One person in specific doesn’t actually exert that much influence, but rather the economy is the sum of the whole.

What Can You Do to Prosper Financially In These Times?

   Your vote doesn’t directly mean your finances will take care of themselves. That doesn’t mean your vote doesn’t matter - so for our American neighbors, go and vote. Your nation is more than just the stock market.

   But for everyone, don’t rely on the government, any government, for your financial well-being. Financial freedom is a worthy pursuit, but a journey where you are in the drivers’ seat.

   What to do, you ask?

   Keep sticking to your financial plan. Ignore the noise. For the long-range focused, invest in a diversified portfolio, and keep investing through all the ups and downs. The dollar cost averaging will take care of your returns, buying more when prices are down, and less when they are up. The diversified aspect takes care of your risk.

   For those with a more immediate investment focus? No fee savings accounts and government bonds. Those investments, while providing near 0% returns, are as safe as you can get.

   Do not try to gamble with who will win an election, and speculate about what that will mean for the economy and stock markets. That’s gambling, pure and simple.

   Success is yours, if you only make a well-thought out plan, and stick to it. Don’t get side-tracked by the clowns on the sidelines. This is your financial future, go after it with all the zeal that a commitment of that magnitude requires.

3 Steps to Recover from Identity Theft

   Identity theft is a growing concern, especially as we all expand our digital identities. 

   In light of cyber-security awareness month every October, it is important to know exactly what to do if you suspect you are a victim of identity theft. In the event of a compromised identity, there are three critical actions that you need to take.

   During 2019, I received a particularly disconcerting surprise. After an odd alert on my phone, I signed into my online banking. To my horror, my credit card bill was several thousand dollars higher than it should have been, all within the last 24 hours.

  1. Call Your Financial Institutions

   The first thing you need to do as soon as possible is to call your banks and credit card issuers, putting a stop payment on all your cards. 

   Most identity theft has one purpose, to steal your financial resources. By racking up bills and charges, you can quickly find yourself swimming in debt for purchases you never made.

   Fortunately, by reporting quickly, you can have those charges stopped, and even reversed so that you don’t owe anything.

   In 2019 after my credit card details were compromised, I immediately called Visa to explain those charges weren’t legitimate. Within 5 minutes, I had laid out that these charges were indeed not mine, and shouldn’t be charged to me.

   That simple phone call, made quickly, had all my cards locked, the charges reversed, and new cards reissued and in the mail.

   Of course, the most important things here are transparency, honesty, and speed.

   When I called Visa, they had actually already flagged those transactions on my account as suspicious. My honesty through the process meant that the whole situation was resolved quickly. But calling the bank isn’t always enough.

  1. Report the Fraudulent Activity 

   While a compromised card might not be full-fledged identity theft, if there are concerns that the fraud goes deeper, you need to report that theft to the authorities.

   Notifying the police is a good first step, especially if the identity theft includes the loss of personal identifying documents like your driver's license.

   The next group to identify are fraud protection agencies. In Canada, you should be contacting the Canadian Anti-Fraud Centre. In the US, you should be contacting the FTC. Each of these consumer protection groups provides additional resources to you, the victim, and also take steps to protect others from similar incidents.

  1. Update All Passwords and Accounts

   We’ve all experienced the frustration of our employer’s IT department forcing a password change every 90 days. You can’t reuse old passwords, they can’t be too easy to guess, and you’ve still got to change them every 90 days? 

   But if your identity does get compromised, the third item on your action list should be to update all your passwords immediately. A password generator like lastpass can help generate strong passwords. 

   Identity theft is a serious problem, and getting more and more prevalent in our society. While changing your passwords frequently and protecting your personal identifying information are both important, we can’t always protect ourselves from the unseen. 

   If someone does get a hold of your personal or financial details, it is important to act quickly and decisively. Set aside panic and hold off on your anger. Following these three steps will help you protect your resources, and recover from identity theft quickly.

5 Types of Insurance You Need

   Insurance can provide a life-line in a dire situation, but only if you have the right coverage. With so many options for insurance, what types of insurance do you need to keep your family protected?

   The 5 types of insurance here are all ones that you should definitely consider for your insurance portfolio.

Life Insurance

   Everybody dies at some point. And even death isn’t cheap. The costs associated with a funeral can add up quickly, and leave your loved ones holding a hefty bill. One way to protect your loved ones from the high costs of dying is through life insurance.

   Life Insurance pays out your policy in the event of your death. This can help cover funeral costs, and provide a financial safety net to help your loved ones weather a difficult storm. These policies can be broken into Whole Life Insurance, and Term Life Insurance. The type of policy that is best for almost everybody is Term Life Insurance.

   Life insurance isn’t required for everybody all the time, but in certain life situations that insurance is the smartest choice you can make. If you have significant financial obligations, whether that’s from buying property, owning pets, or raising children, life insurance is essential. The same goes for the primary bread-winner in a family. Life insurance protects your loved ones if you aren’t around to support them anymore.

   It is often recommended that your Term Life Insurance policy is 10 times your annual salary. That provides enough of a financial safety net to help your loved ones carry on this wonderful, albeit sometimes difficult, journey without you.

Medical Insurance

   Medical insurance is a must-have for everyone. A single medical issue has the power to bankrupt even the wealthiest among us. Because the costs or medical care are so high, you need to have health insurance.

   Fortunately for the Canadian readers out there, that health insurance is paid for by the government. But if you aren’t so fortunate to have government help with those medical bills, you need to buy your own health insurance.

Home or Renters Insurance

   Ask anyone who has just moved about how much stuff they have. As they unpack boxes upon boxes of things they’ve collected, the value of all those accumulated possessions adds up.

   One thing you can be sure of, it’s that life throws curve balls every once in a while. And some of those curve balls show up in the form of theft, floods, fires, earthquakes, and more. 

   To protect your assets, you should have homeowners or renters insurance. These insurance policies protect your home and everything that’s in it. And that can mean a lot of things. 

   If something were to happen and you lose your worldly possessions, home/renters insurance will even pick up the tab to help you settle somewhere else. Whether that’s paying your rent somewhere else, or setting you up in a hotel. Tragedies don’t have to wipe you out financially, as long as you have the right homeowner or renters insurance. 

Auto Insurance

   Automotive insurance is another must-have if you own a vehicle. Thousands of pounds of steel hurtling down a roadway might be a convenient way to move around this big ol’ world. But, it’s also a good way to really cause some damage. 

   Having auto insurance helps cover you from both the property damage that arises from a car accident, but more importantly, that insurance covers any necessary medical costs. Those costs can quickly lead to financial ruin for an individual. 

   Not only is auto insurance a good idea, it’s legally required before operating a motor vehicle. Don’t gamble with your financial life. Make sure you’re covered by auto insurance before you drive.  

Long-Term Disability Insurance

   Have you ever considered not being able to work? Most people don’t give that any thought. But as you are the source of your future wealth creation, you need to protect yourself and your ability to create that wealth. 

   Disability insurance provides income replacement in the event that you are no longer able to work. While other insurance can help with things like medical bills, other costs don’t simply go-away because you can’t work. For those costs, having a guaranteed income replacement is essential.

   When shopping for disability insurance, the best rates are often through your employer. In fact, many employers provide this insurance as a mandatory benefit. But, not everyone has an employer. For those readers who work for themselves, having a disability insurance policy is essential. This will provide the financial safety net you need in case you are unable to work for an extended period of time.

   Life insurance, health insurance, homeowner / renters insurance, automotive insurance, and disability insurance. These policies should make up the majority of your insurance portfolio. Each policy is designed to protect you and your loved ones from an otherwise devastating situation.

   The right insurance ensures that you are taken care of, no matter what life throws at you.

The little things

The little things matter as much as your greatest accomplishments.

   The beer was flowing at a recent company evening social, just like any other. But this evening was not like any other. We were there to say farewell to an esteemed colleague, Greg, as he parted ways with the company. Over the past half decade, Greg reshaped the sales division of the company, and led the team to double digit growth year over year. His list of accomplishments was long, between bringing in some of the largest deals the company had ever sold, to entering new markets internationally. But this evening, as those who worked closest with him gathered to say thanks, none of those accomplishments were mentioned.

   Instead it was the little things that people reflected upon. 

   His cheerful demeanor, always quick with a smile. The way every situation was a learning experience, even when a prospective customer slipped away. Or the best practices and recent wins shared each weekly meeting. The way each team member felt valued and respected, regardless of their experience.

   Greg’s influence could be felt throughout the team, and that team, his team, had grown and prospered because of it. All because of the little things.

What are your little things?

   Much as Greg was remembered for the way he showed up for his team each day, you too will leave your mark not just through your grand accomplishments, but also through how you show up. These daily behaviours, the little things are what people cherish about you.

How are you showing up?

   Just as we cherish the little things that makes others who they are, they cherish the little things you do that make you who you are. Take some time to reflect on who you want to be, how you want to be remembered. Now, how are you embodying those values and virtues that you have identified? What little things are you performing each day?

What is Asset Allocation?

   There are three fundamental principles to successful investing: asset allocation, market timing, and time in the market. To achieve optimal financial returns, while balancing an appropriate level of risk, we look at asset allocation.

What is Asset Allocation?

   Asset Allocation is an investment strategy that involves investing part of your portfolio in different investment classes; stocks, fixed income, and cash. These assets, or investments, make up a portion of each balanced portfolio. The amount of risk associated with the portfolio is determined by how much of each asset class is held. For example, a 100% stock portfolio is much more risky than a 50% stock, 50% fixed income portfolio.

   Okay, so Asset Allocation simply refers to how much of my investment portfolio is made up of stocks, bonds (fixed income), and cash. I’m with you so far, but why are you telling me this?

Why is Asset Allocation important?

   As one of the three levers that controls investing, Asset Allocation is the most easily adjusted. While we cannot invest earlier, and correctly timing the market is a statistical impossibility, asset allocation is our best bet to invest effectively.

   Asset allocation is widely considered the most important investment decision, with far greater impact than the specific stocks in your portfolio. The asset mix, between stocks, bonds, and cash determines the risk / return rating of each portfolio.

   In general, stocks are the riskiest, yet offer the highest returns. Fixed income is safer, but the returns are lower than stocks. And cash, or Certificate of Deposits (CDs), are the safest of all investments, yet yield the lowest returns. Asset allocation is important to understand, as it governs risk and expected returns. 

   Alright, Asset allocation is important. How do we use it best?

How to use Asset Allocation?

   Financial advisers will often recommend asset allocation based on your age, as a general approach to determine how much risk you are open to. The traditional formula is 100 minus Age = asset allocation weighting. For example, let’s say you are 30 years old. 100 - 30 = 70. This means that 70% of your portfolio should be invested in stocks, while fixed income (bonds) and cash make up the remaining 30%. 

   The traditional formula doesn’t take into consideration the increasing life expectancy, and I would advocate that for our younger readers, the asset allocation benchmark formula should be 115. For our 30 year old reader, that would look like 115 - 30 = 85. Therefore, 85% of a 30-year old's investment portfolio should be in stocks, with the remaining 15% invested in fixed income and cash. 

   This benchmark system makes a very important assumption, that the investments are made with a long-term focus. This long-term focus looks towards retirement, not shorter term financial goals like home-buying or weddings. If the monies will be needed within the next 5 years, a far more conservative asset allocation is recommended.

Key Learning Notes:

   Asset allocation is the single most important lever to control your financial investments. The term refers to how much you invest in a single area, between stocks, fixed income (bonds), and cash. The more heavily weighted in stocks, the riskier the portfolio, and the higher expected returns. As a general rule, a good benchmark for asset allocation can be established by using 115 (or 100) minus Age = allocation for stocks. This benchmark is effective if using a long term focus, for example saving for retirement.

Action Item: 

Perform the asset allocation benchmark calculation for your long term investment accounts. What is your benchmark score?

Now look at your investments. How much, as a percentage, do you have invested in stocks? Fixed income? Cash?

Is there any re-balancing required? Ideally, this exercise is conducted once or twice a year.

Is the Sacrifice too Great?

   Success comes as a result of sacrifices. Giving certain things up to grow allows us to achieve more in our lives. But sometimes the sacrifices that are required are too great a price to pay.

   As we decide what parts of our lives we want to change to experience more; more health, more love, more wealth, more peace, we also need to put boundaries on what we will sacrifice to achieve that. One of our Success Coaching clients recognized his boundaries and enjoys the extra accountability keeping him focused on his priorities. We joined his story as he steps into a new Director level role for a rapidly growing company, providing the promise of substantial career growth, and compensation to go with it. The allure of riches distracts many from the other pillars of their lives. 

   And this focus on career success and the pursuit of financial riches has cost many a man and woman their relationships; both family and friendships. But the cost is often higher than that. Many times we can witness those excelling to the top of their field with shaky foundations; poor exercise regimes, unhealthy eating habits, controlling stress with alcohol or tobacco. As we define success for ourselves, these crumbling pillars of success are hardly the inspiring vision we have. So where do we go wrong? Simply put, we sacrifice too much.

   Understanding what is important to you, and making those areas non-negotiable means you won’t risk building your success on shaky foundations. What does that look like? As we rejoin our coaching client, his success looks like; devoted time to his family each week, a non-negotiable dedication to his fitness, and healthy stress-management practices. These areas of his life are most important to him, and anything that would require him to sacrifice them is asking too high a price, regardless of the promised reward.

   This is why our Success Coaching program was designed to keep you accountable not only to your goals, but also to your boundaries. Knowing what you are sacrificing to enable growth will help you determine if the trade is worth making. We all need balance and boundaries; what is worth sacrificing to achieve more, and what is not. You can't walk the path of success if your health and relationships are crumbling all around you. That is why it is essential to keep track of all that you are doing, and all that you need to do to keep the boat the right way up. That chest of gold does no good in a shipwreck at the bottom of the ocean!

   As we strive for greater success, we need to make sacrifices, trade-offs that help us become more than we currently are. But before we get caught up in the pursuit of success, we also need to establish our boundaries. What are you willing to trade in, to sacrifice for more success? And what aren’t you?

 

Action Item:

Take some time this week to decide what your boundaries are. What are your non-negotiables? What are you not willing to give up, no matter what the promised reward is? Write these down. Commit to them, and as you achieve success, you’ll find yourself living that vision of your ideal future.

Giving Up to Grow Up

We can achieve more than what we have because we can become more than what we are.” Jim Rohn

   Have you ever thought about what you would give up to achieve more success? What you would be willing to not have in your life to be able to live out your dreams?

   It is often said that success comes as a result of sacrifice. That when we give up certain elements of our current life, we are able to fill those gaps with things that mean more to us. These sacrifices are present in all areas of our life. We give up on being single in order to pursue a relationship with people we love. We give up on watching TV in order to read books and learn new skills. Or the sacrifice of late nights socializing so we can get some much needed sleep and exercise. The sacrifices we are willing to make help determine how far we will be able to go.

   My girlfriend Marianne recently made a sacrifice with the vision of a better career. In her sacrifice, there are lessons we can all learn from. You see, Marianne had grown over many years to become an exemplary performer in her job. Ultimately she found herself in a place where she had earned the respect and friendship of those around her professionally. Many of us will find ourselves in similar positions in our careers, where the right now is comfortable and profitable. But right now is just that, a good place to be right now. If we want to reach our potential, we need to continually look for the next opportunity. 

   One such opportunity presented itself to Marianne, in the form of a career change into management consulting. Embracing this opportunity would mean giving up on her current successes, in order to achieve more in the future. Giving up the close working relationships she had with colleagues (who she could also consider friends), giving up the comfort of familiar where she knew she excelled. This “give-up” list was extensive, and that is frightening. To replace all that she would be giving up was an equally extensive list of new challenges, knowledge she didn’t possess yet, new professional relationships to be cultivated. 

   So how do you move forward when what you have to give up, or sacrifice, seems so daunting? Turn that fear into excitement.

   By re-framing the opportunities, not by what you are losing, but by what you are gaining helps put into perspective the sacrifices that are required. You are not giving up that TV show, but you are gaining strength and vitality from the combined time in the gym. You aren’t giving up freedom as you gain the close companionship of a relationship. And for Marianne, the sacrifice was re-framed into excitement. Excitement for the chance to learn and grow, excitement for future opportunities, excitement to achieve more for her career and herself.

   We all have to make trade-offs in our lives to become better, what do you need to give up to become better? What's holding you back? Sometimes growth is held back by our comfort and familiarity with our current situation. Turn fear of failure into excitement to achieve more and you'll see the benefits of making these trade-offs. That excitement will help you through the often difficult immediate transition, and keep you focused on your path to success.

Understanding Income Taxes

   You know, taxes are unavoidable. And if you have to encounter those taxes (free tip: you can't escape taxes), you might as well understand what the implications are for your financial well-being.

   Income taxes are one of the most common taxes we all encounter. And unfortunately, there are some serious misconceptions about how taxes are levied against us. This is brought about by the marginal tax rate system, as well as some payroll practices that feed our misconceptions. Let's take them in turn.

Marginal Tax Rates

   Much of the world uses marginal tax rates, and while the percentages may vary from country to country, and even province to province (state to state), the system is the same. Governments provide us a tax break for a certain income amount, and slowly increase rates the more we make. The increases in tax rates fall into "tax brackets". The marginal element means that the tax rates only affect income in that tax bracket. To understand how this works, let's look at the 2019 Canadian Federal tax rates. (Note: if you are reading this from another country, the process is the same but the percentages are likely different.)

2019 Marginal Tax Rates

   Taking a look at the Federal Marginal Income Tax rates we can see that if we make more than $ 47,631 in income in the 2019 calendar year, we only pay 20.5% on any earnings above the $ 47,631 mark. For the first $ 47,631 in income, we are only paying 15%. This scales as we earn more and more. Let's look at how this tax system works for someone making $ 100,000.

Marginal Taxes on 100K

   In this example, we work through the tiers and end up with a total amount of tax paid to the Federal government of $ 18,140.90. There is a common misconception that earning more money means the government takes a higher percentage of every dollar. In the above example, the misconception is that making $ 100,000 the combined tax rate is 26%, meaning $ 26,000 in tax paid. The difference from this misconception is an extra $ 7,859.10!

Taxation Myth: The more I make, the more taxes the government takes on all my money. 

   We can see that this taxation myth is dispelled! But we need to pass the word out. I have heard people working for hourly pay actually giving up shifts to not reach the next income bracket, thinking they are saving money in taxes! Let me simply sum up the math by saying, earning more money is never worse for you financially.

   But these myths did start somewhere, so let's look at why that is!

Income Taxes and Payroll

   Income Tax is usually automatically calculated each pay period by payroll software. The software makes an important assumption: that current earnings are the level of earnings you will earn all year long. Now let's say you receive a mid-year raise on July 1st, with your salary increasing from 70,000 to 85,000. Your income for the year will be $ 77,500. Unfortunately, the payroll system will be taxing the last half the year as if you are making $ 85,000 in annual income. This means for 6 months you will be paying too much in income tax. 

   This same situation can have an even more skewed result for certain types of compensation as well. This can be seen in bonuses, commissions, and overtime. These additional one-time compensation line items can inflate your earnings for the current pay period substantially, which puts you into a much higher marginal tax bracket for that pay. Explained another way, most payroll software calculates your one-time earnings as being received each pay. If you earned an extra 25% in overtime this pay, your income tax paid will be as if you make an extra 25% each pay (wouldn't that be nice?).

   The good news is, this will be refunded as soon as you file your taxes the following year. Unfortunately, the fluctuating tax payments and clear as mud explanations lead many people to jump to the wrong conclusion about how income tax works.

Key Take-Away

   Income Taxes are levied against all of us as we earn income. These taxes are based on a tiered system, called marginal tax rate system, where any income in that given tier is taxed at the same rate. If you go up an income tier, the tax rates levied against those additional dollars earned changes, but only against the extra dollars above the tier minimum! Pro tip: Knowing these tiers is vital for planning your investments!

   When calculating income taxes, most payroll software calculations annualize the earnings from the current period. That means if you make more money on one pay cheque, you will pay tax as if you make that amount each pay cheque. These extra taxes paid will be refunded to you when you file your taxes the following year. Earning more income will never be worse for you financially.

Note: Personal tax credits also have an impact on the amount of Income Taxes you owe. For simplicity, tax credits have been left out of this discussion, as not everyone is applicable for the same tax credits.

Dressing for Success

How often do you go for a haircut?

   This question sparked a pivotal learning point for Jay Abraham as he divulged in an interview with Ramit Sethi. The learning from Jay resonated deeply with me in relation to a topic one of my coaching clients asked about. The topic of dressing for success. 

   How often do people get their haircut? The answer, gave the stylist: it varies greatly between people. Some people come in every month, every 3 months, every 6 months. With such a discrepancy in the frequency of visits, one must ask the question, why? It is usually very obvious when people come in from visiting a stylist, they look fresher, cleaner, more professional. Despite the cliche, "Don't judge a book by it's cover." We do judge. And when someone takes time to dress well, we notice, and it reflects well on them. There are a few elements at play here:

Confidence

   Think of a well dressed lady or man. Their stature improves. They stand taller, smile broader. When someone knows they look good, they exude an aura of confidence that lets the world know, "Yeah, I've got this". Confidence itself leads to a wealth of benefits, all of which can be externally triggered by the simple act of dressing for success. These benefits include; openness to tackling challenges, increased professional performance, happiness, and health. Not only are we more willing, and even more capable of taking on our obstacles, our performance also increases. Without self-doubt, we end up smashing through obstacles that otherwise we would have turned back from. You can see the impact of confidence in a common martial art demonstration, punching through a plank of wood. The key to success in this maneuver is to strike through the wood, embracing the confidence that you can break through the wood. On the flip side, if you don't believe you can break the wood, you'll hesitate slightly which will reduce force, and the obstacle won't be broken. This analogy perfectly illustrates the benefits that confidence can have when facing professional challenges. And through this, confidence brings us to the other benefit of dressing for success, competence.

Competence

   We need to dress the part for success, however that looks in your profession. You would be skeptical taking fitness advice from an overweight personal trainer, you may also discount any health advice received from a sick doctor. We expect people of their own craft to look and act the part. And that starts the moment we first see them. I would be concerned if my surgeon showed up to the operating room in sneakers and gym shorts, regardless of how talented she claimed to be. That same surgeon though, dressed in scrubs, would give me confidence that she knew her business, simply from how she dressed. 

   As the world becomes more progressive in their tolerances, some things will always hold their merit. And dressing well is one of those items. Regardless of the dress code for your profession, when you show up looking good, that speaks volumes.

   So if there is one take-away here, keeping up with your appearance grants you confidence and an air of competence that immediately sets you at the front of the pack. Dressing for success is an easy way to get a leg up on your competition, and look good doing it!

The Cost of Borrowing

   Last week we looked at interest rates and their impact on our financial accounts from the perspective of an investor. Even more common in our financial lives though, we use borrowings from the perspective of a borrower. Understanding how interest works before we are charged is imperative to avoiding the slippery slope of consumer debt that plagues many individuals. As a recap, interest is a charge on borrowed funds. 

   In its most simplified terms, borrowing with interest means paying back more than you borrowed. The difference is the interest paid. The lending/borrowing arrangements are incredibly diverse, but can be evaluated based on the Annual Percentage Rate of interest. UK and North American consumers are fortunate in that respect, as interest rates must be displayed in that form. This standardizes the cost of borrowing on most consumer loans by showing the annual cost of the loan. As the interest rates indicate the cost of the loan, the higher the APR, the worse the loan terms are.

   The most common source of short term borrowing we see are credit cards. The interest rates on these cards are astronomically high, often ranging from low double digits all the way to 20% or more! At interest rates like these, failing to pay off your balance before interest is charged dramatically increases the cost of your purchases. Other common sources of debt are; vehicle loans, mortgages, lines of credit, store financing, to name a few.

How to deal with Debt

   When paying off debt, your primary goal is to pay off anything with the highest interest rates first. This will reduce the cost of interest, and ultimately save you money in the long term. This is the mathematically best solution, and goes contrary to some other strategies. When available, you should also try to consolidate your debts into one single, lower interest rate loan. This can be especially hard to do if you already have poor credit, as banks and other lending institutions will charge you a higher interest rate to account for the extra perceived risk, or they simply may not lend anything at all.

Pro Tip: If you don’t have an emergency fund, you need a line of credit.

   Getting a line of credit when you don’t need one will result in more favourable interest rates. The line of credit costs you nothing if you don’t use it, but in the event of a financial emergency, being able to pay off credit cards using a lower borrowing cost option will save you potentially tens of thousands of dollars on interest in the long run. Note: this is a last resort backup plan, and shouldn’t be utilized to finance any purchases that are not absolutely essential to living.

When to use Debt

   Debt can be used for our financial benefit. We are well aware that home ownership for most of us is only attainable if we finance through a mortgage. This use of borrowed money allows us to enjoy assets that we otherwise wouldn’t be able to afford. There is one main reason to use debt, and that is leverage for an investment. Leverage simply means borrowing to purchase something. In the case of real estate, we often expect the value of our investments to increase over time, and if the gains surpass the interest costs, we come out ahead. 

When to pay off debt

   If you have debt, there are times when it is more advantageous to not pay off the debt. Incurring interest expenses intentionally may be the right financial move if you can make more money by investing than you would save by paying off the debt. If you can invest at a 10% return, and only pay 7% in interest, you are ahead 3%. Unfortunately the future is never certain, so you should also take a risk premium into consideration. If in the above example, the investment return under performs expectations and results in a 6% return, you would have paid more in interest than you earned. 

   As a result of future uncertainty, to make the equation equal you need to assign a risk premium. To display this in a formula, we would look at the decision like this:

Expected Return = Cost of Interest + Risk Premium

   In the above example, we can use the 7% interest and a 2% Risk Premium. If our expected return exceeds 9%, we are comfortable taking the risk for the extra returns. If the expected return is less than 9%, we should pay off the debt for the guaranteed cost savings of 7% in interest charges.

Take-Aways

   Borrowing money is an important part of our personal finance journey. Understanding when and how to use debt, and how to evaluate different options will ensure we make the right choices on our path to financial freedom. Some of the key take-aways from this article are:

  1. The higher the APR, or Annual Percentage Rate, the more interest you will be paying, and by consequence, the worse the debt is.
  2. Paying off the highest interest rate debt first will save you the most money.
  3. If you don’t have an emergency fund, get a line of credit before you need one. Your terms will be better, and in case of an emergency, those better terms can help keep you from financial ruin.
  4. Use borrowings to invest in assets that will increase in value. This is called leverage.
  5. Pay off debt first unless the investment return is more than the interest rate on debt plus a Risk Premium that suits your investor type.

Pick your Poison

Pick your Poison

   Marketers describe us as consumers, and we are. We are all creatures of consumption, from what we eat and drink, to the appointments we fill ourselves with, and the information we digest. And when it comes to the things we ingest, either physically, mentally, spiritually, we need to be vigilant about what enters our bodies. 

   Of course words of wisdom like this are easily passed over as too basic or trivial to even worry about. We all know that excessive alcohol consumption is bad for our health, or smoking carries serious long term risks. And these are all true! But the pitfalls of our pervasive over consumption goes far beyond the studies mentioned on the 6 o’clock news.

   Of the list of things that we consume, food and drink certainly picks up the lion’s share of the blame tab. Every week a new study is released discussing the negative elements of too much sugar, too many carbs, fats, acids, the list goes on. These studies can be summed up rather succinctly by saying: Too much of anything is bad for you. But aside from the food plate (formerly our well known food pyramid), what other areas of consumption should we be wary of? 

   The poisons we pick fall into two categories; time, and information.

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Time:

   The alarm clock buzzes, we reach over and hit the snooze button. Wait, this isn’t the early 2000’s anymore. Our snooze button is actually a finger slide on our touchscreen. A few minutes later, the electronic rooster is at it again. Grumbling, we roll over and open our eyes, picking up that phone and sliding the screen up. First thing, let’s check social media, and probably our inbox to see what happened in the overnight hours. Great, calendar invites for today.

   Within 15 minutes of waking up, we already see 4 meeting requests, that’s half our day gone in meetings that we probably shouldn’t even be in. One of the most venomous poisons that we willingly consume is these irrelevant demands on our time. And not that we aren’t important, but a 4 line email or a 5 minute phone call would likely straighten out our issues without the need for an hour long meeting. 

   The consumption of time is incredibly poisonous for two reasons. First, it kills our productivity. As we run from meeting to meeting, we hardly have time to sit down and focus on our important tasks of the day/week/year. And secondly, consuming our time by running around being busy feels good. We love the feeling that we are important, that someone needs us, and by stepping in to be their hero, we forget about our own quest. 

   Over-consumption of time is a devastating poison to swallow. And this problem is only going to get worse as we become increasingly connected. 

It’s Time We Took Back Our Time.

   So what can we do to take this time back? The best strategy is to plan out your day the night before. Put on your calendar non-negotiable time to work on your priorities, on the tasks that are most important to your goals. Taking back your time before someone else tries to will vastly improve your success as you strive for greater and more abundant achievements. 

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Information

   Perhaps the most pervasive of all poisons is actually information. Think back to that electronic rooster crowing. As we load up our calendars with irrelevant meetings, what else do we consume? Social media captions of celebrities, news feeds full of stories of the latest tragedies around the world, and all sorts of horrific incidents. The same is portrayed on breakfast TV and 6 pm news. Sensationalist headlines all striving to out-do one another by bringing us the most corrupt and terrifying stories. Once we start down that slide of human suffering and misery, it becomes almost impossible to then take on the day’s challenges with an open, positive mindset. 

“It doesn’t matter where you get the bad stuff, it will still do it’s damage.” ~ Jim Rohn

   As we strive for achievement, we need to be conscious that negative stories and news will fill us with negative energy. This energy is not optimal for producing creative solutions to problems. In information, as much if not more than anywhere else, do we need to pick our poison well. 

What Poison Should We Take?

   As we each pursue different interests, and have different life experiences, the level and content of information we need differs greatly. If you have small children, you’d be well off to know about unsafe roads in your neighbourhood. Or the happenings overseas where a family member is vacationing. Or the government regulations that might affect your business. But none of us needs to consume all of the information we currently do. If you aren’t an aspiring Hollywood actress, knowing the habits and routines of the Kardashians is probably not helpful for our growth.

The Antidote:

   We can’t steer clear of all negativity. There will certainly be days were we eat too much, or have one too many drinks. And for almost all of us, we can’t reasonably control our entire calendar. But we do need to exercise some careful planning in all of these areas. Pick your poison. Choose what you want to consume, and what you don’t. Making these choices before they are made for you will vastly improve your rate and level of success. 

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Action Exercise:

There are two things we can do this week to start picking our poison:

  1. Block off an hour each day to work exclusively on your priorities. This is a non-negotiable calendar slot where you focus entirely on your goals.
  2. Start unsubscribing from email threads that don’t serve you any more. Start small, with only a couple this week. Do you miss getting the emails? Do you even notice not getting them?

Understanding Real Interest Rates

Understanding Interest Rates
Why Stuffing Cash in Your Mattress is a Bad Idea

   Interest rates are one of the most commonly advertised terms in the financial world. High interest savings accounts, low interest credit cards, high interest rate bond yields, low interest rate mortgages, the list goes on and on. But what does that actually mean for us? And how do interest rates fit into our personal finances?

   Interest rates fit into our finances in two ways, the cost of borrowing, and a return when investing. We'll look at the two here.

The Cost of Borrowing

   Interest is charged on the principal, the amount borrowed, and is usually expressed as an annual percentage rate (APR). If the interest is compounded, the interest is added to the previous principal, and interest is charged on the cumulative balance. This is essentially charging interest on interest, and is how many people end up drowning in vicious consumer debt.

   We’ll take a deeper dive into the debt side of personal finance next week. For this week, let’s look at the other side of the equation, lending money for interest income.

Interest as an Investment

   There are essentially 2 ways to generate interest income, lending money, and storing money. Almost all bank accounts provide a small amount of interest income. To increase that interest income, we can lock our funds into a bond or loan of some form. With innovations in FinTech, there are increasingly diverse options for lending outside the traditional realm of corporate and government bonds.

   Bank accounts provide an excellent way to hold emergency funds, and funds used for day-to-day needs. I recommend at least 2 bank accounts, one should be a high interest e-savings account for your emergency fund, and the second should provide you no fee transactions for your daily needs. Both these options provide you liquidity, the ability to quickly retrieve your money, but the trade-off is a lower interest rate. 

   To receive a higher interest rate, we can invest in bonds and loans. The money here is set aside for a pre-defined period of time, and to compensate for your loss of liquidity, the interest rate paid to you as income is higher. For example, a 5-year bond might pay you 3% interest, while a 20-year bond may pay you 5% interest. The extra interest income is paid to you to compensate you for using your money for a longer period of time.

Learning point: Interest Rates (income) increase to pay you for the use of your money for a longer time-frame.

   There exists one more consideration when looking at these interest rates. That is the difference between the Nominal Interest Rate, and the Real Interest Rate. The real interest rate takes into consideration inflation, and is more important to an investor than the nominal interest rate. They are tied to each other by inflation.

   Real Interest Rate = Nominal Interest Rate - Inflation Rate

   When evaluating your bank accounts and debt investments (bonds and loans), often the Nominal Interest Rate is stated. Your purchasing power, or your economic result will be impacted by the Real Interest Rate. 

   To see this in practice, let’s look at a few examples:

Understanding Interest Rates Examples

   As you can see, the real interest rate means you only make money when the Nominal (or Stated) Interest Rate is higher than the rate of inflation. Or put another way, the purchasing power of your dollar decreases over time. 

Learning Point: If the Nominal Interest Rate is lower than the Inflation Rate, you’re effectively losing money.

   For this reason, storing the extra cash under the mattress is a bad idea. Not to mention, mattresses these days are quite comfortable without the extra padding. 

Key Personal Finance Strategy Take-Aways

   Carrying a large balance in your regular bank account does you few favors, as Example 1 above shows, inflation is slowly eating that money up (even if it doesn’t look like it!). To ensure your emergency fund is available, and able to stretch as far in the future as it does now, I recommend a high interest account to counter some effects of inflation. And finally, when investing in debt or loans, to ensure that you have a profitable investment the Nominal (Stated) Interest Rate isn’t the right interest rate to look at. Instead, you need to calculate the estimated Real Interest Rate. 

   Don’t worry, we’ve thrown enough math at you for now. If you want speculation on what inflation rates will look like in the future, a quick google search will provide you professional estimates. 

   Equipped with this knowledge, as you engage in debt investing (bonds and loans), you’re ready to make a calculated decision!

Formula Recap:

Real Interest Rate = Nominal Interest Rate - Inflation Rate

The Coffee Cup Retirement

The Coffee Cup Retirement

   We've all heard about saving on the latte every day, and that will eventually fund our retirement. But this story has been sensationalized by media and spouted all over every personal finance blog ever written. Some in favor, some argue it's ineffectiveness. Neither are helpful at dissecting the story into actionable insights. To help us understand the reasons behind this overused example, a quote from leadership expert John Maxwell comes to mind.

"The secret to success is to do a little bit every day. Doing a little bit every day is a lot more important than doing a lot some day." Most people live in some day." ~ John Maxwell

   When looking at the coffee cup retirement example, the key is not that eliminating your morning coffee will make you rich when you retire. The numbers alone don’t support this assertion. Rather, the key is that if you make a seemingly small choice each and every day, over time that adds up to substantial wealth.

“You mentioned numbers, prove it.”

20-Years of Coffee
40-Years of Coffee

   As you can see, even after 40 years, saving $ 5.00 / day into a retirement account averaging 6% return each year won’t allow you to reach your retirement goals. Saving $ 5.00 each day is simply not sufficient to fund a comfortable and lengthy retirement, although it’s better than nothing. 

   As I’ve mentioned before, the minimum amount that should be set aside each year is 10%. The coffee cup retirement only works mathematically if your gross annual earnings are $ 18,250. If you earn more than that, the amount you need to save also increases.

“So the coffee cup retirement doesn’t work?”

   No, if you earn more than 18 thousand a year, the coffee cup retirement of saving $ 5 each day doesn’t work. But the principle of “small actions add up to big results over time” still stands. Using that as our take-away we can understand that cutting our morning mocha isn’t likely to lead us to financial freedom. But a small action, such as investing 10% of our annual salary each year, every year, will put us on a path to financial freedom. 

   Keep drinking that coffee, just as long as you save 10%. If you aren’t there yet, maybe $ 5 each day is a good place to start. Just remember, small positive choices every day will put you on a path to financial freedom.

The Painful Pursuit of Success

   The pursuit of success should be made through all reasonable efforts. I believe it would be an affront to our futures if we did not strive to become more than what we are now, at every stage of our lives. Every person who has tasted success, be it a professional athlete, a commendable home-maker, or a business professional, would all agree; success is a joy. Achieving greater successes is exciting, enjoyable, and exhilarating. But there is one thing we must all face to achieve these pleasures; and that is the painful pursuit of success.

   You see the milestones we talk about, those are the happy times, those are the signs that our efforts are paying off. But the efforts themselves, they are not fun. Those painful pursuits are the small, seemingly insignificant behaviours that most days we don’t feel like doing. Like showing up at the gym when we’re exhausted and the temptation to just hit snooze is almost overpowering. Or giving up on that much desired lazy night in to attend a networking event. Or taking the high-road because of the lessons others can learn from our restraint. These scenarios, and a hundred others like them every single day play out. And they hurt.

   Delaying instant gratification of simply doing what we want in the moment is the largest differentiating factor in achieving success. Successful people know this: what is undesirable or even painful in this moment, will be rewarded with the joys of success in the future. To borrow from our fitness fanatics:

No Pain, No Gain

   The truth in this statement cannot be overstated, not in the intentional pursuit of pain, but rather in the sacrifice needed to become great. Pushing ourselves at great lengths once or twice is not the path to success. Instead, it's the small, seemingly insignificant at the time, choices that lead us to success.

   The painful pursuit of success is thus: making the choices each day, each week, that aren’t the most enjoyable in the present moment, but pay us off with interest in the future.

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Action Item Take-Away: 

   What choices are you making unconsciously each day that could be changed to ensure a brighter future? What choices could you make today that improve your life tomorrow?

   Think on this, write down the choices that you will start making today to ensure tomorrow is brighter. And then, take action on those choices.