Four Habits for Lifelong Happiness

I’m going to write a series of posts aimed to help people of all ages regain control of their financial lives. I hope to fill a bit of the void left by most public and private education systems regarding financial smarts. I strongly believe that the better off we all are individually, the stronger and healthier we are as a nation.

While these posts will be geared to investors of all ages, I have a bias towards helping younger generations. Many of the ideas that I present here have been learned from my own younger self’s mistakes, and from those of my client’s. But because there’s no better teacher than the “school of hard knocks”, you’ll find that I’m not shy about sharing my own stories here.

Leading a productive life is a bit like running a business, and few are formally prepared to do that. It is sad that millions of students graduate high school, and even college each year without a clear understanding of the basics of running one’s life with a purpose. These graduates are thrown to the wolves and endlessly tempted by new “must haves”, while offered creative ways to buy them. Yet these “wants” won’t enrich many lives, and instead just distract most from leading fulfilling and productive lives.

So, I’ll break things into what I call the Four Habits for Lifelong Happiness. Essentially these are practices that allow for a healthier and lower stressed life. The practices of spending less than what one earns, being your own money boss, saving for a rainy day, and planting dividends for the future might sound cliche, but they support a productive and happy life.

Speaking of breaking things, along the way I’ll help readers break a few bad habits. These are habits we’ve all fallen into for various reasons, but we’ll replace them with better ones. Here’s a few we’ll take on right away together:

• Telling ourselves “I work hard, I deserve this”
• Not talking about money in front of the children
• Buying our kids things because we feel guilty about something
• Comparing ourselves to others
• Not doing “The math” on most things
• Letting our jobs determine our lifestyles

Instead, I’ll share how to work smart now, so we can work doing something we enjoy later.  We’ll learn to communicate openly about money with our spouses and children, with much better results. We’ll start doing some very basic math, every time we’re thinking about buying something. We’ll find new purpose for whatever jobs we may be involved with right now, or be better prepared to look for a more rewarding career.

After we’ve gone through this posts, we’ll end up turning off the auto-pilot that runs our income and spending, and well … our lives. We’ll feel empowered and free to take on new opportunities like never before. We’ll be more productive and valuable members of much stronger local communities, and ultimately as more people embrace these practices, our country.

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The Easy Road to Success: Farming?

Warning: This post is like a French film, the ending is not a happy one.

When I first moved to Fort Collins I met a Mechanical Engineer that used to work in Oil and Gas Exploration, that was starting an Apple Orchard just north of town, in Northern Colorado. What’s unusual about this encounter is that he’s rather young, yet showed a lot of wisdom and humility. Our conversation touched upon some of the issues surrounding resource extraction, and the challenges of farming. Then there are two other friends, a former Nuclear Engineer and Architect that took a similar fork in the road. That’s what this post is about, it’s about three people that I know that understand complex systems, and have independently decided to change careers, in a major way.

There are not too many people that biked to their jobs at oil and gas companies in Houston. In fact our new friend told me with a smile, that « it’s a very small community ». It’s probably an even smaller community that is honest about their reasons for doing so. Will explained that he was not biking to work in Houston to save the environment, he’s doing it because he’s cheap and doesn’t like spending money on gas. I can relate to that!

Speaking about saving the environment, that’s not what this post is about either. A friend once surprised me by saying « If I really cared about the environment, I’d step in-front of the next 18-wheeler on I-25 » At the time I was surprised, but now I know: we eat, sleep, and work using oil and coal. There’s no way around it that will save the environment, because of economic laws. If one person reduces their demand, it makes the price for resources cheaper for the other. So much for the invisible hand helping in that regard, and give up all hope ye who expect our humble leaders to do « something » other than talk about the walk.

It appeared to me that Will understands this. While we didn’t spend enough time together for me to truly understand why he got out of Oil and Gas Exploration, he did mention that the exploration companies didn’t really have a full grasp of the consequences of the technologies they were utilizing to improve extraction yields. In any event, how many engineers are willing to forgo high paying jobs in exchange for a life on the farm?

I have a friend in Albuquerque, who left a career as a Nuclear Engineer when he was younger too. I was curious about why he got out of the field at a young age. He almost laughed at me when he explained how nuclear energy is inherently unsafe. How safety improvements over time are more than offset by additional power plants, unlike other industries. He explained that it was basic statistics. Because nuclear energy production lacks the ability to operate at a stable state if left unmanaged (think solar flares), safety improvements can’t keep up with growth demands. He said that the safest and most cost effective reactor is the one we currently orbit from a large distance.

Another of the smartest people I’ve ever met was trained as an architect, and started developing apps for the App Store, before it was called an App Store. He appears to have done well with several of his projects. Today he drives a Tesla and his other car is a tractor. A Tesla driving farmer, really. He has a prolific farm in the Rio Grande Valley and while he helps new app developers pro-bono, he refuses to ever publish another app himself.

At least three engineers, architects, and technologists I personally know are quietly seeking out a farming life. They are obviously not doing it for the easy life, the dolce vita, the fame or fortune that that life will bring them. Famous personality Jim Rogers, author of Investment Biker, is famous for telling people « Learn to be a farmer ». Jim, toung-in-cheek tells CNBC show hosts that « In the future it will be farmers that will drive Maseratis, not the investment bankers ».

I’m fairly certain that neither Mike, Will, or Andrew changed careers so that they might purchase a Maserati someday. Their reasons are complex and dynamic. One thing I’m certain of, they are each sleeping better at night knowing that they are working with the Earth, rather than taking very big calculated risks with it for short-term rewards.

But even so I can’t finish on a positive note, as I promised with a French film, the ending isn’t a happy one. Forget the environment. It’s toast for a little while. There’s no worry for the establishment that these three individuals are pioneers of a new movement. There is absolutely no movement to « save the planet », no matter what you read about electric cars and drone deliveries. Mankind will find a way to extract the last pound of coal just as the last tree on Easter Island was cut down nearly a millennia ago. Don’t feel bad as you read this on fossil fuel powered server farms that need banks of air conditioners to cool. We’re not as intelligent as we think. We’re hard wired with an overwhelming tendency to put immediate survival ahead of all other pursuits. It’s just the way it is. The Earth will recover just fine once 97% of us are gone.

Fin.

Hey kids, don’t act like a grownup!

“The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”

– John Maynard Keynes

This post is about something that just about everyone is experiencing, but this post is for the next generation, and how they can avoid one of the mistakes nearly every adult makes. This is about not borrowing to fight inflation.

I recently received a notice of our utility bills increasing nearly 5% for 2017. The notice emphasized that they limit utility increases to less than 5% annually. This gives me the impression that they’d like to increase it more, but they are being kind to us by limiting it to 5%.

All of the grownups are ignoring real inflation and are supplementing their lifestyles by borrowing all the money they can. They are also doing everything they can to avoid looking at the math behind their lifestyles.

I don’t know too many people who’s income is increasing anywhere close to even four percent annually. How many of us know how much a five percent increase ads up to when compounded annually for ten years?

http://www.bankrate.com/calculators/savings/compound-savings-calculator-tool.aspx

Let’s look at an example. Let’s say you were all grown up and earned $50,000 ten years ago. If you were to maintain the same lifestyle today while your costs were going up 5% yearly, do you know how much you’d need to be making today? Just to stay in the same place, be able to pay your inflating bills without taking any steps backwards in your lifestyle.

The answer is you’d need to be making just under $81,500.

https://en.wikipedia.org/wiki/Household_income_in_the_United_States#/media/File:US_Real_Household_Median_Income_thru_2014.png

But, this is definitely not what’s happening. Median income in the USA has fluctuated between $52,500 and $56,500 in the last decade. While some might be tempted to say that this is due to the 2008 mortgage crisis, let’s pull back some more.

Let’s say you made $50,000 twenty years ago. To keep up with true inflation, not adjusted by some magic factor, for things you actually need to purchase to live, you’d need to be making $132,665 today. This is not to live like a rock-star, this is what you need today to maintain the same lifestyle you did in 2005, assuming it’s 2015 now, which it’s not anymore.

Since the FRED Chart goes back to 1985, let’s guess how much someone getting by on $50,000 in 1985 would need to be earning today, just to maintain their lifestyle in 2015? The answer: $216,000.

That’s the power of compounded inflation that all the grownups are feeling but not understanding. Now of course it’s not exactly 5% each and every year. Sometimes it’s more, and sometimes less, but the effect is the same. The average grownups income is not growing anywhere near the CPI, let alone real inflation, which according to some economists has been closer to 9% some years.

Taking to the inflation calculator again, looking at the FRED chart we can see that median U.S. income has increased less than 1/2 a percent over the last 30 years. So when you get a utility bill that boasts about how they are limiting their increases to less than 5 percent, know this: It’s getting tougher.

You have two choices, one on the income side, the other on the spending side.

For income you will have to get creative in how you make money. Maybe you can AirBnB your extra room, or work with Uber. But none of these are long-term solutions. By long-term I mean something that would work for more than, say ten years. Over time more and more grownups are looking for ways to make up the difference between their wages and their living costs, resulting in less money being made with rentals of all types. Once we’re past the point were everything is for rent, then there’s no advantage left in it. That’s an economic law.

One day you’ll be a grown-up and you’ll need to focus hard on continually reducing how much you need to purchase to compensate for increases. For example, if you own a home you might want to invest in solar heat and electricity to offset increases in your utilities. Eventually you might be able to live virtually off-grid in the middle of your city. When you look for a house, look for one that has a lot of sun exposure. Fortunately sunlight is not diminishing in value with inflation.

For that reason, forget the flawed return on equity (ROI) models that the adults bought into hook-line-and-sinker. They were duped into thinking that it takes decades to recoup an investment in solar by using flawed assumptions. What’s the value of a $10,000 investment in solar if it knocks out a utility bill that increases 4.7% per year for 30 years? Do the math the grownups forgot how to do.

Look to take « off-grid” every cost that is increasing with inflation:

Electric (can you go PV?)

Heat (can you use solar heat collectors?)

Gasoline (can you charge your Nissan Leaf from your solar array?)

Water (what can you do to reduce use and are you allowed to capture and store rain in your area?)

Food (a greenhouse in the yard?)

Taxes (haha, no sorry you have to pay those everywhere and no matter what)

Speaking of taxes, you do have some choice over the community where you choose to pay your taxes. There are big differences between state and cities, so do your research.

To be fair, the reality is that inflation is hitting utilities hard too. Costs of materials and resources which utilities need to pay may be increasing more than 5% annually. The reality is that everyone is in the same boat, except for some that get lucky once in a while by speculating on resources, or choose to live more simply.

Exploring A Little Piece of Route 66 History

I’ve recently been thinking about New Mexico history and how quickly things have changed in the last fifty years.  We’ve lived here for over 20 years now, and it’s amazing how it’s changed in just that short time.  

So on a recent drive on 333 (along I-40) to Tijeras I noticed an area near the highway where it looked like an old road had been built.  I had been wondering if there were any traces of the original Route 66 between Albuquerque and Tijeras.  So I parked and walked up an embankment to the graded area and sure enough, I found an old road.

These photos show the East and West views from the road.  At first glance there’s no sign of a paved road, it just looks like a dirt road that goes nowhere, ending at the edge of the Sandias.

However it didn’t take a long walk for me to find what looked like scrapped road materials, namely very dry and brittle gravel and tar, along with some steel cables.  

After the Federal Highway Act of 1956, construction of Interstate 40 through New Mexico started in the 1960’s, and was completed through Albuquerque in 1970.  I would guess that this stretch of Route 66 must have been cut off from the world sometime around 1970.

I’m not sure if all of this is really a part of the original Rt-66 entering Albuquerque from the East, but it would have made sense to build it here.  Perhaps someone remembers and can post a comment about it here.  

In any event here’s I little souvenir from the ‘likely’ Rt 66 I explored.  Just like that last can of anchovies on Futurama, it will be for sale on eBay in 1,000 years for a trillion dollars.  In the meantime close your browser, and go explore our amazing world!

A Little Solder Keeps an Old E320 Running

Living the good life means helping things last longer. It feels good to keep something from having to be replaced, plus it’s good for the environment given the resources necessary to make something big like a car. Last weekend it was a 1999 E320 that I’ve been slowly bringing back to “kicking strong” condition. After replacing the transmission and steering rack (I didn’t do that myself), the old machine needed new headlights. A previous owner had replaced the factory units with these super cool looking ones that worked like … well they didn’t really as far as I was concered. They were actually dangerous to use at night at any speed above 50 mph, wait make that 40.

So I headed to eBay for some used original Mercedes headlights. I found a set for less than $140.00 with shipping, that were in fairly good condition. As you probably know, modern cars are required to use plastic lenses, and that plastic doesn’t hold up well to the Sun’s UV. So getting used headlights that aren’t completely “crazed” is a challenge. Fortunately some dismatlers (aka junk-yards) remove the parts off the cars they receive, then inventory and store them indoors. You pay a bit more than going to the open-air junkyard, but you’ll be more likely to get parts that have been basically “garaged” for the last decade or so.

I received the set and they looked as described in the Buy It Now auction. But one of the headlights had a surprise for me when I opened the back panel to check the bulbs. The wiring insulation was falling apart, and someone had previously used electrical tape to keep wires from shorting out. Cool, a new project!

Car manufacturers experienced many problems when they transitioned to bio-degradable plastics in the 1990’s.  I’ve read that Mercedes was one of the first to adopt this practice and paid the price.  They lost a lot of loyal customers that had become used to the legendary longevity of their 60’s through 80’s cars.  Not only did the insulation fall apart after about a decade, but some car owners found out the hard way that rodents really liked the new flavors being used in the wiring. Many manufactures in an attempt to go green had used soy, vegetable oil and other natural materials in their manufacturing processes. The unintended consequence was that criters were finding a new mobile home with a good food source while the owner was sleeping.

I had to bring this unit back to like new condition before I was going to install it. Fortunately one lifelong hobby of mine has been tinkering with electronics, so I didn’t hesitate to pull out the solder and soldering iron. Since I was using non-biodegradable wiring from my used parts bin, my only expense other than time was solder and some shrink-wrap tubing. In a little over an hour I had replaced all of the wiring from the connector to each of the bulbs in this light assembly.

Now I have a vehicle with industry standard lighting that should perform as designed for many years. Had I gone to Mercedes for a replacement set I would have been out over a grand, and the wiring would experience the same issues in a decade or less.

So in effect I undid a bit of the “green” work originally done by Mercedes. But, one could say that by keeping this machine out of the landfill with just a little bit of effort, I’m reducing an even greater need for energy and resources to make another. I don’t really know actually, I’m not a manufacturing or recycling expert. All I know is that it’s a tiny amount of plastic to keep this machine out of the landfill.

Great Photos from Apple’s Early Days

A snapshot of Apple’s early days with some rare artifacts.

Sam Hotchkiss

This article from the SF Gate gives us a peek into the early days at Apple. A picture is worth a thousand words.

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Learn by teaching, even when it’s uncomfortable.

I can attest making a mistake in front of a classroom is very very uncomfortable. But one never forgets, and perhaps the class seeing the teacher being humbled might even be beneficial for them.

Sam Hotchkiss

If you need another reason to go speak at your local WordCamp or Meetup Group, try this one on for size: do it to learn something new.

I stumbled across this article from 2011 where Annie Murphy Paul talks about why we learn more when we teach.  There’s a deep level of satisfaction derived from teaching that is hard to get any other way, and it drives us to become experts in whatever it is we are sharing with others.

So don’t just teach for others, teach for yourself, and apply to speak at your local WordCamp!

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