Monday, July 16, 2007

Multiple streams of income (part 2)

Wow, there are definitely some negative thinkers here:

I have a number of friends who quit jobs to start a business or new career and fell into the trap of thinking that they could make a living doing something they love.

Did they make the appropriate lifestyle adjustments? You can't just jump jobs and then expect to live the same lifestyle. When you start a business doing what you love your whole lifestyle has to change. Usually, the trap is thinking that you can change one fundamental part of your ecosystem (your job) and then have everything else remain stable.

Karl Katzke:
“it’s better to be liked than to be good.”

Isn't being liked part of being good? If you're twice as productive as the average worker bee, but you're a jerk and no one wants to work with you, then you're not very good at your job.

And let's face it, if you're amazing at what you do and the average guy next to you is getting the pay raise instead of you, then you should be asking for a pay raise to match his. If your bosses don't think that you're worth it, then it's your job to find a new boss that does. Yeah it doesn't seem fair, but that's just the way it works. Truth is, if you really were amazing at what you did and you were underpaid, then your departure has cost the company more money than the pay raise would've cost them.

So not only do you get more money, your old company is actually going to start losing money (I guess it seems fair now).

Brip Blap:
If you want to succeed as a wage earner, you have to put a LOT of effort just into your job.

Depends on your definition of success. If I work 40 hours weeks for 40k and you work 50 hours weeks for 50k, is that really success? Sounds to me like you're just getting paid for the privilege of working an extra 10 hours/week.

I figure that success is all about getting more done in less time. Having to put in overtime is just a bad sign for everyone involved, it either means that the company is not bringing in enough money, or that the guys at the top at reaping more benefits.

So maybe you need lots of EFFORT, but more effort is not about giving more time, it's about getting more done per unit of time, which is really what you want to do anyways b/c you want more money.

So how is more efficient work time any different from more efficient investing time? Maybe you can make more "extra money" spending 5 hours on your fund picks than you can by spending 5 hours on "professional development". But there's a break-even number here and you should figure out what that is, I mean otherwise you should be investing full-time b/c you'd make more in 40 hours of that than 40 hours of work.

So, we have the comments about the long working hours to climb the corporate ladder. I think employers are expecting more and more for wages that decreasing relative to costs.

Well Deborah, from a global standpoint, anyone in North America has been living well beyond their means for decades. The economy is Globalizing which means that we're flattening out the economy and flowing money from rich countries to poor ones. Of course, we're the rich ones, so money has to be flowing elsewhere. So over the next several years (at least) of the rate of increase of our standard of living will probably slow, but our standard of living will still be increasing.

Short term, things may seem like employees are losing ground, but long term, these don't seem to be much more than variations. After adjusting for inflation, median salaries haven't really shifted much in the last 30 years. Meanwhile the average household has more square footage/person than 30 years ago, we have commodity computers, way better health care, cheaper air travel, safer / more efficient cars and commoditized access to things only in sci-fi books at the time: Internet, portable music players, digital cameras. Now sure, the last 2 or 3 years have seen increased profit margins (so employees are getting less than they could), but this stuff doesn't last forever.

100 years ago there was no "retirement", so the very fact that you can even envision having enough money to spend several years or even a couple of decades doing nothing "productive" is actually quite a feat. Heck it's a feat that you even have that many decades in sight. Average life span in 1907 was about 47, you didn't even have decades to piss away. Here's a neat link with more info.

So this whole "employers wanting more for less" thing may be a sentiment, but it's really hard to back with any kind of numbers. Do you want more than last year? More than 10 years ago? More than 30 years ago? Or more than 100 years ago? Your statement about employers expecting more and more is probably only true for time spans less than 10 years. B/c I'm sure living better than my parents were 20 years ago.

As to the whole corporate ladder thing. What the heck is that anyways? Maybe it's just me being a 20-something, but there is no single corporate ladder out there.

There are people I listen to and people that listen to me. There's income I generate and income I get paid. If I'm not getting my cut of generated income, then I find someone who will give me my cut or I go out on my own. If I'm making less than the people that listen to me and I'm doing it for too long, then I leave.

Corporate entities do not need you for anything other than your abilities to generate income and your abilities to lead income generators. Most of us are streams of income for the companies we work with. They owe us as much loyalty as the income we bring in and we likewise owe them as much loyalty as the income and lifestyle they can afford us.

If no amount of increased efficiency will earn you your next raise then you've hit the end of your job with that company. Your new job is to find the company that will afford you the next raise for the money you bring to the table. Because that's what you are, you are a stream of income, you are to a company what a stock pick is to you.

So let's skip this whole corporate ladder paradigm. Your ultimate goal is lifestyle and happiness enhancement. Your worth to the company is the money they can make off you and the company's worth to you is the lifestyle they can afford you. You are a commodity to the company and they are a commodity to you. Anything that you do that does not respect this relationship is doomed to failure.

Thursday, July 12, 2007

Where do things go wrong in Software

A while back I posted this in reply to somebody's really negative time at their office. It was serious reply to a "fellow programmer" wh0 was having some work-world issues.

Now just today I came across this piece by Frank Carr.

Which brought up a lot of the same stuff, he's asked for comments, so here's my reply. It's a good reminder of what we go through.

But I'm going to say something that may be wildly unpopular, but hear me out: Joe (our "hero") deserved to be fired .

Obviously, so did Brian (the evil manager), but Joe failed to do his job from the very beginning. When you are the team lead, your job is the protection of your staff and the protection of the project that's assigned to you.

Joe just failed this thing multiple ways, starting very early. In Chapter 3 he asks for help getting a meeting with Mary and Brian gives him a verbal reprimand. Good Leads don't let this happen, you don't just "ask Brian" for help, you forward him copies of all of the other failed meeting requests and tell him that your stake-holder meetings are being canceled. You tell him that you have no specifications or timelines and that you either need Brian to book the meeting and/or you need a new stakeholder and you put Red Exclamation Mark on the e-mail. If you don't get a reply in 2 days, you e-mail Brian's superior and you forward him all previous e-mails.

Already, this mitigates the big problem in Chapter 4. Joe agrees to work, but he still doesn't have a stakeholder, he's agreed to work that he simply cannot deliver. If I'm working for Joe, I'm probably already off looking for new work. Joe has failed his role as project lead, he's accepted work that he cannot delegate to a finish. He has failed to protect his team and his project.

The rest of the story is a funny read in personalities (could make for a movie), but all stems from the one fundamental flaw. It's all just more downhill b/c Joe couldn't even get the first thing right.

Now following that, Joe demonstrates his fundamental personal flaw. Joe cannot defend himself. He accepts not only Brian's reprimands but also the official HR reprimands. By accepting these reprimands he has not defended his own career or well-being. Brian is clearly a work bully and (in this story) Joe makes no effort to defend himself. Bullying is not just bad practice, it's illegal. Any office with an HR department knows this. Rather than accept an HR reprimand, Joe should be printing out e-mails and gathering documents for his case. He should be talking to HR and telling them that Brian is engaging in Bullying behavior and that the incident is not isolated. Joe should have phone numbers on hand for all government-related agencies and for his lawyer and he needs to walk into the HR office and tell them that the bullying ends as of his visit.

Joe needs enough spine to say that he will not be fired over Brian's behavior and he needs to follow up with a lawyer if he is let go. Why? B/c he's a team lead and that's his job. If Joe can't even protect himself, there's no way he can protect his project and his team. I don't want to be with Joe or follow Joe, I have very little respect for Joe. Joe's not a hero, he's a loser with a protagonist role, just like Brian is a loser with an antagonist role.

The story rings very true but all of the major players are losers. So I guess it's a great example of what not to do.

Multiple streams of income

Here's a neat one worth talking about:
FTA: My question is, should I be focused on smaller multiple streams of income? Or focus on larger, single projects?

I'm hearing financial jungle here, but I'm going to take him one step further. There is no passive income.

A 9-5 requires well 8-10 hours/day (let's not forget commute). Rental properties usually suck up all kinds of time, if you have a 9-5 you end up losing weekends left and right. Rentals require repairs (contractors), you have to find new tenants, make newspaper postings, file all of the related paperwork, etc. To maintain a rental "income" that's actually passive, you need lots of rental property, which eventually becomes it's own job. Blogging for money is no more or less a job than the above, at best it's just more fun, but it's not guaranteed that you'll keep doing it, check this one out.

Now it seems that everyone thinks stock investment is actually passive, but really it's still actually a lot of work. Want to make an 80k salary? Oh that's easy you just need 2 MILLION dollars in the bank at 4%. Of course, after the government's share you'll still only end up with 40k, but I guess that covers the bills (and let's not forget 1% interest rates). Now if you don't have that much money (which most of us don't), but still want to make an income, then you're definitely going to have to work at it: financial readings, market watching, moving investments, finding money to invest, taking out loans to leverage your gains, however you do it, it's definitely work. I mean you'll have to do something to find a way to make better than average returns off less money.

(As an aside, finding 2 million dollars is quite the issue. The average Canadian family income was about 55k in 2001 and about 60k in 2005. That 33 years of the average family saving the entirety of their income! I don't think the 2 million dollar retirement plan is really that viable)

So here's the way I like to look at it. You don't get to take any money with you, none. At best you get to leave some to your kids, which is no promise they won't just piss it away. And at that point, you might as well give them most of it while you're still alive to help them manage and possibly respect it :)

Now the bigger question is "If you actually had a passive income stream and didn't have to work at all, how big would it need to be and what would you do with your time?". You see, unless you have no drive, will or interest of any kind then you'll end up doing something. And that something is the really important part.

You have things that you love to do and somewhere out there is a job for some aspect of what you love to do. You can make all the excuses in the world it "not being a job" or how "nobody makes a living at that", but that's all just BS. You like blogging, someone's making a living on it, you like carpentry? reading books? doing Tai-Chi? flying hang gliders? running long distances (started at 30!)? eating food? Ok that last one's a little weird... point is somebody is taking the thing they like to do and they're making a living out of it.

Diversifying yourself can help keep money coming in when one market dries up. But I think that there is so much more to investing than just throwing money into the markets or housing and assume that you're leveraging enough of yourself. Maybe I just read the wrong blogs, but it seems to me that the easiest and simplest investment is really yourself (but that's a whole other post).

The investor's primary goal is to generate as much wealth per time unit (day/month/year) as possible. The person's primary goal is to generate as much pleasure per time unit as possible.

Unless you get a real kick out of generating wealth (and not spending it), then these two goals are in some kind of conflict. So the real question is "how much money do I need to make to do the things that make me happy?". Money is really all about what you want do with it.

So do you need multiple streams of income?

How about "do you love what you're doing to generate money"? If you don't love what you're doing then make really sure that the money is letting you do something that you do love. I mean, we can talk all we want about wealth generation and pros/cons, but that's not the goal. The goal is to have the money to do the things that make us happy.

What you probably want are multiple streams of happiness, the rest is irrelevant. If you're like the Frugal Trader and have four different "jobs", then the question isn't really should I do "more or less", the question is actually two related parts:
  1. How would I rather spend my time?
  2. How much money do I make that way?
Answers to one will influence the other, b/c lack of money will limit your options. But spending too much time on things you don't enjoy will limit your life. If you graphed this out (Happiness vs. Money), you'd quickly realize that the graph is not a straight line, or even a simple polynomial function. It's not easy to find some "max point" of happiness. Especially when things change, as they always do, with time. If you make less money, but love your days more, then where are you at? If you make more money and love each day a little more then are you on the right path?

So back to the start "one stream or multiple streams?", well this is fundamentally the same questions as "what the hell do I want to do with my life". So that seems as good a place as any to start.

Monday, July 9, 2007

How we split the money

I just read this post today and the comments brought a little something to mind. The way that my fiance and I split the money seems kind of unique.

My fiance and I maintain both separate AND joint accounts. We've just started this in the last month (we just moved in together), so we're still working out the kinks.

The way it works is that we split the bills by income for the month and then we keep the rest in our separate accounts. This way I can buy her gifts and it's actually me buying, likewise, I can take myself out for a coffee and not feel like I've "stolen" money from her. The weighted split is the neat part though, if I make 2/3 of the money for the month and she makes 1/3 of the money, then we split the rent/groceries/phone/etc the same way: I pay 2/3 of the tab, she pays 1/3.

The goal was to make kind of a self-correcting system. If she goes back to school and starts making 1/6 of what I make, I just start paying more and we both live a little poorer, but we both have our own money. In the same way, it encourage positive growth. If my partner can find 15% more income, then it's in my benefit to help them b/c it reduces my expenses.

If you do the "I pay this, you pay that" method, then people start to feel like it's "their" money. If one person makes the car payments and the other makes the mortgage payment, people start to get a sense of propriety over the "thing" they're paying for ("my car", "my house", etc).

If you do the 50/50 split, someone is almost inevitably making less and there's the tendency not to throw money back into expenses when the number changes. Plus it doesn't encourage partner growth, if you're splitting 50/50, then your 10% raise is "your" money; if you're splitting by weighting the income, the the 10% raise helps both of us.

I like the individual accounts though b/c having all the money in one big pot can also lead to competition issues: who's spending more? who's habits are more expensive? "you did that so I should be able to do this", "I can't believe that you spent OUR money on this".

The whole system seems pretty fair, so is it? What do others do?

Monday, July 2, 2007

Drive vs Natural Ability

A old friend of mine posted a great discussion the other day and I think that I have a reply.

I told her about a friend of mine who, while average in terms of natural ability, has always managed to get by (and sometimes even excel) because of her amazing drive. A friend of my roommate's, however, is imbued with talent, intelligence, creativity and vision - yet is rarely able to finish what she starts, due to lack of drive.

Which therefore begs the question: which is worth more, drive or natural ability?

Hey Georgia, I like this question, to which I'll respond with a quote from a UFC fighter, GSP: "The only thing that beats hard work is talented hard work".

I love the question, which is worth more, but I'm thinking that it really hinges on what is actually defined as success. Take the old classic movie Rudy. No "talent", quite "simple", not really bright at all, worked like mule. His success? One play on a college football field (University degree)? For another look, take Boxer from Animal Farm. Not too bright but does the work of two horses and several other animals, talented and hard-working. Of course, Boxer basically gets taken to the cleaners and worked thanklessly until he dies.

So there's some hardwork and some hardwork + talent (but no brains either way).

What about hardwork + little bit of talent? Take Charles Schulz (Peanuts fame). Guy is a workhorse, does 50 straight years of iconic comics. But really, he's not that great, I mean how many times does Charlie Brown miss kicking the ball? Don't get me wrong he's really popular, has some classic stuff, but I read Pearls Before Swine now and my top 10 Peanuts comics (in 50 years) don't come anywhere near my top 10 Pearls comics (in like 5).

So what's up with Pearls? Writer Stephan Pastis is a lawyer by trade. Writes comics in his free time and finally lands a contract with Quits his day job and then goes national when Scott Adams (Dilbert) makes a post on his blog about the comic. Hooks up with Darby Conley (of Get Fuzzy) picks up on the biz in months and now outshines his own mentors. Oodles of hard work combined with a bunch of talent (though I don't think he'll be writing for 30 years :)

So what's my point? Well, I really respect Pastis (Pearls), but the other guys not so much. You can supplant a certain measure of talent with hard work (and vice-versa), but at best you just end up "slightly-better-than-average". Now Peanuts was good at what it did and Schulz made a wonderful life of it, I'm sure. But it was never a Far Side or a Calvin & Hobbes or a Pearls.

The way I see it, Rudy and Boxer and Schulz were all "successful", but maybe at the wrong things.

So I think the answer is that talent is the most important thing to start with, b/c it seems so pointless to hinge a living on something you're bad at. Rudy blew all this time to play football for one shot on the field. For the time he invested, he could've been a star greco-roman wrestler of maybe a pugilist. Boxer at least worked where he had talent, but then that's all he did so he took talent, applied hard work and then completely left out ingenuity. Charles Schulz succeeded based solely on hard work with a little talent thrown in, but he just produced 50 years of the same 20 gags.

But Rudy will never be Michael Jordan and Schulz will be never be Gary Larson. So I'm not saying "don't try", I just think it's really important for people to figure out what they can do passionately AND relatively well before dedicating oodles of hard work.

One of my heroes: "Crazy" Dean Karnaze, an ultra-marathoner, runs 100+ miles at a time. Took him until 30 to realize that he loved doing this stuff, but the guy has a will of steel that pulls him through. His same "will of steel" and work ethic pulled him through university and into a top-paying sales job. But nobody in the sales field will know him, not like the runners who put in 50 miles at time, they know him. He now runs professionally, his records will stand for decades.

Sunday, July 1, 2007

Housing Market Woes?

In response to a MyMoneyBlog article.

There is a lot of stuff going on here.

OK, US median household income: right around the $45k range with about 1.4 income earners. A quick search brings up some median house sales numbers of around 220 to 250k. Interest rates are going up, 6.84% may be causing less house competition and the WSJ is writing articles about people losing their (150k) places. We're all talking about housing being kind of a giant bubble right now and we now have the wonder of the 50-year mortgage.

I mean 45k = $3750/month or about 3k after taxes. On this salary you have an allowance of maybe 1700/month for housing if you want to stretch it, especially if you plan to operate a car and still feed the family. Now really, between utilities, repairs, insurance and taxes, you're talking like 5-700/month, which leaves you with about 1000 for a mortgage.

Clearly, 1000k/month doesn't buy the median 220k home. So the median income does not safely buy the median home. Let me put this differently: average people cannot afford average homes.

Jonathan, I'm with JW here these numbers just don't look good. Obviously, as you've pointed out, housing cost increases are also coinciding with larger houses. Some markets (like Vancouver) actually have people taking "interest-only" mortgages (let's not even talk about that level of crazy). As you've also discussed, the inflation adjusted median income hasn't changed very much in 30 years. So technology may have provided us the means for somewhat larger houses, but I don't think that we've magically doubled our ability to make larger houses, people are just taking out 50-year mortgages instead.

So with all of this talk, maybe we're finally pushing the edge of the big bubble. I mean, check out this board, look at Red's example, people are in really deep and digging deeper b/c they don't know what they can afford. We all know people in too deep, heck we probably all know a dozen people in too deep and the american economy is sliding downwards. The market will only bear this hysteria for so long.

People will miss their payments, interest rates will rise, banks will foreclose record numbers (already happening?) and the value of homes will go downhill b/c nobody will be able to afford them.

There will be resistance of course, people will avoid selling for less than they owe, but then the foreclosures will come, rates will go up and the cycle will continue until those people that really can't afford homes will be shoved out. Banks don't care, it's not their job and the US government can't stpe in. If the US government intervenes in foreclosures, then USD will plummet internationally.

Either way Jonathan, I'm with JW here when it comes to buying, patience will definitely be a virtue b/c we're peaking here.