People See Transitions As Risky And Expensive


In management there are only three numbers that matter

None, few, and many.

It is not that these are so sacred by themselves, but as with much of life, transitions matter. A change from no employees to one is a massive change. A change from one to two is relatively trivial.  A later transition from few to many is quite problematic too.  All sorts of new regulations appear. Ethnic and gender mix, accommodation for disabilities, unions maybe, the list is long.

In financial planning there are just two times that matter

Now and then

As with businesses the transitions matter. You don’t get to move back and forth, but some of the things you do now affect then.

Ones not near are easy to ignore. 

The trick to know is they are the same thing in one way.

Lifestyle, which is what most people want to preserve, is about spending money. Spending money now; spending money in the future, is pretty much the same task. Understand value. Shop. Enjoy.

The future is different in another way

All income arises in the present. You get a paycheck today or a dividend check today. You collect rents once a month. All income is dependent on time. Your task is to recognize where the money comes from.

In the early years of your career it will come form the application of your skill and your time to some task. Later it will come from money working instead of you working. You must take some of the money you earn today and push it to then so it will earn money you can spend, then.

No so much of a problem. Except

Most of us are not good at treating the future as urgent. It is somehow a different space. Strange, a little scary. A change, and as we know, all change is difficult.

How do we motivate ourselves to overcome the transition? It will always be there. Truth is, we cannot.

We can recognize there are things in the future we can best control from the present. That is the key. Control the future from the present.

Investments, insurance, exercise, flossing, stress management and more will pay back in the future, but cost something in the present. Thus, the problem.

Businesses have solved the problem

They implement processes.  People are good at habits and those are just about all a process is. So start a habit. Monthly saving, insurance premiums, trips to the gym, eat better, meditate.  None difficult, all effective.

By creating a process the transition is not long.  You don’t have to be motivated forever. Just long enough for the habit to become the new normal in the present.

You already know how to do this. Then, the past, comes to you this way.  A series of payments on the house, the car, the education. Once they are a habit, they are no longer a problem.

When you have a problem, attach a process to it and it goes away.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com  866-285-7772

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Taxation and Fairness


All taxes are fair and all taxes are unfair.

What matters is what happens to the money. If poorly spent, people’s attitude to taxes takes over.

It is a matter of perspective. If I pay, they are unfair. I had better uses for the money.

If you pay, probably I am okay with it.

Taxes have become too political. 

I have mentioned before that polarization works in favor of politicians. Rich and poor is a good one. Envy is powerful and there are far more people who pay nothing than you might expect.

Recent data tells us that in the United States 45% of the people pay no income tax. Will they care about taxes rising. They might care about lowering them because that could imperil their benefits.

Fertile ground for political games.

Taxes are how we pay for society

Who pays and how much should be simpler than it is. If there were no incentives to spend the people’s money, taxes would be much lower. At some lower tax level people, would pay much less attention to the whole thing.

They might even see an advantage to earning more by working harder. That attitude is what makes countries great.

No government and no tax system has ever done much to add value.

The best governments provide a way for people to flourish. They don’t minimize the chances of success.

How did we get here?

We can blame politicians for being hypocrites and sometimes corrupt. We can blame bureaucrats for mindless rules and near infinite delays. We can blame NGOs and interest groups for silly interventions that ignore the common good.

Trying to satisfy everyone is a losing game. Politicians are forced to play it because we demand more.

The people are to blame too, but no politician can say so.

Sometime, maybe soon, the system will change to be effective and efficient. There is only one way to go from here.

Question. 

Who will make the first move, the people or the governments?

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com  866-285-7772

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Saving Won’t Make You Rich


Financial assets are important

Houses, cars, antiques and collectable are assets, just not financial assets. They are assets you use and enjoy. Financial assets produce income or can be liquidated into an efficient market.

Not all are equal.

A business produces income  but there almost no efficient market should you want to liquidate. Small rental properties are like that with a more efficient market.

Bonds are income producing and more predictable in the short run. Stocks are more volatile in the short run anf stable in the long run.

Saving is not enough to meet your goals

We save,  and for many, that is the only way they will come to have financial assets. Inheritances and lottery wins are nice, but uncertain. Saving is the key.

Saving is a necessary condition to achieving future wealth, but it is not a sufficient condition.

What you do with savings matters

Investing is not a user friendly environment. It is complicated and populated with some self serving people who speak a foreign language. You can flourish there, but not without effort.

  1. Understand what you are trying to do. If it is to create enough money to hold out and work for you, you are on track. You want money making money so you don’t have to work. You cannot get there with a savings account. Taxes and inflation will make your effort futile. You must participate in economic growth. Like a business.
  2. So buy a business.  That’s what stocks are. You don’t need all of it, just what you can afford. Look for products you know and value. How hard is it to replace Kool Aid? A dominant market share with cost leadership is a good place to start.
  3. Maintain flexibility.  Have some cash or some eadily liquidated sets like bonds. Opportunities are unpredictable.
  4. Reinvest income. Total return indexes provide much more return than do capital only indexes. You should be building future income not current spending.
  5. Watch costs. Taxes, advice and transaction costs hurt. Sometimes not paying for advice costs too. Be smart and frugal at once.

Effective management is where wealth comes from.

You cannot save yourself rich.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com  866-285-7772

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Work, Discipline, Talent, and Success.


Succeeding is a multi-part task

Success is not likely if you have no ability. At the same time it is not certain if that is the only value your bring. Talent is helpful but it won’t make things work out all by itself.

I have noticed over the years that young hockey players sometimes are dominant when they are 17 or so, but by 20 or a little later they have become ordinary. Most of these are big kids who were dominant at whatever age you want to look at them. The problem was that when they were young they could succeed without working very hard. Work is a habit not a given. Eventually talent is not enough. 

The same holds true for smart children who never learned how to learn.  They can probably get through high school on their talent but it breaks down pretty quickly after.

There are three elements to success.

  1. Talent. You cannot create much without the raw materials. It is fair to say that everyone has a talent.  It may not be intellectual giftedness. It could easily be the ability to influence others, or the ability to work in a team, or physical attractiveness.  It does not matter what your talent is, what matters is what you do with it.
  2. Work. Talent without work seldom succeeds. Those with talent must learn to work because that is what will make it flourish. Without work, most can get by for a while, but that leads nowhere.  Getting by is not enough.
  3. Discipline. The part that informs work. If you can get by with no work, then there must be something to add to the mix to make the work happen. In the beginning it may be external but over time it must be a do-it-yourself result.

What is the payback for that?

Aside from financial and recognition rewards, there is another. People who are doing their best work and are learning doing it, can see the value because they know how hard they worked to be able to do it. Self-fulfillment. A sense of achievement that the slacker never achieves.

Passion. The point where you do the work because you must do it. Like Picasso. Success is a byproduct.  Enthusiasm looks like a good place, but it is just a shadow of passion. Enthusiasm is passion after taxes.

Leaders seeking success

Whether, parent, teacher or employer, understand that work, talent, success and discipline all come as a package. Be sure to provide some input to the ones with talent.  They need it more than most of the others.

Some thoughts:

  1. Dreams don’t work unless you do.  John Maxwell

  2. No one can arrive from being talented alone. God gives talent; work transforms talent into genius.  Anna Pavlova

  3. Hard work without talent is a shame, but talent without hard work is a tragedy. – Robert Half

  4. Talent is cheaper than table salt. What separates the talented individual from the successful one is a lot of hard work. Stephen King

  5. Discipline is the refining fire by which talent becomes ability.  Roy L. Smith

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com  866-285-7772

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Necessary Things


Not everything just happens

If you have specific things you would like to happen, you must be prepared to invest time, money and skill in making them happen. Sometimes it helps to make a list of the necessary things that must be present to have a chance at success.

For example, if you want to win a lottery, there is only one necessary step.  You must buy a ticket.  Everything else is just stuff.  Knowing the odds, knowing how you would invest, knowing what gifts you would make, and knowing how you would be taxed matter not. No ticket.  No chance.

Other things work like that too

Being financially independent is not an accident

People who achieved this level of success have learned that they have a choice. They can work for money or they can get money to work for them. Most people who do not notice the money working for them question, end up working forever. Not because they want to, but because they have no other choice.

Financially independent just means you work because you like it.

How to get there

Having money work for you has one necessary condition. You have to have money. The question becomes where do you get the money.

There are several choices:

  1. You could inherit it. (Necessary condition: you have someone who will die and leave money to you)
  2. You could win a lottery. (You buy a ticket, the easy part and win, the hard part)
  3. You could could carry out a dramatic crime. (Crime doesn’t usually pay if you consider all the potential costs)
  4. You could acquire skills and experience and earn more than you spend. (Most earning is a function of what you can contribute to whoever is paying you. Could be an employer or a client. Either way you get paid for your value to them.)
  5. You could spend less than you earn, regardless of the earning amount.

The one universally available way

Spend less on lifestyle than you earn.

Financial life is about recognizing the important variable that lifestyle costs money.  Every month, forever.  You can turn off parts of it, maybe the golf club fees, or the second car, or even entertainment and meals out. But, no matter how frugal, you cannot turn off all of it.,

Balancing today’s lifestyle and tomorrow’s lifestyle is the principle reason to save money. We can talk about estates and security funds and many more purposes, but eventually it comes down to having enough to do what you want, when you want,  in the way you want.

That costs money and it must be there or you do without.

Which works better for you?

Spend all you income now and spend nothing after you must stop working.

Spending nothing later is probably not much of a problem. Actuaries tell me that a healthy 75-year-old male will starve to death in less than 30 days, so I suppose having nothing is really just a problem with a plus/minus 30 day end point.

Balance requires discipline.

It is an arithmetic question to find how much you must save to balance this year’s spending against saving.

Saving is hard to do if it is in isolation. It is easier if you make it more concrete. Saving today is just groceries, or travel, or recreation, or medical care tomorrow. If you think you won’t need those things it is okay to save nothing now.

The necessary thing that makes saving pointless.

You must die before you need the money.

Not such a terrific long term strategy.

Always know the key variable. Apply the idea of the key variable to everything you do. Don’t allow distractions. Focus on important things first. 

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com  866-285-7772

 

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On Being A Good Employer


What are reasonable expectations for an employee?

Many people want their job to make them better. It could happen, but there is a need to participate. Perhaps it would help if there was a less general list.

Safety

Physical safety is a minimum. Emotional safety is at least as important. Every employee has a reasonable expectation that they will not be belittled, abused, or disrespected. Of course, they will treat others the same way.

Fairness. 

Employees should expect compensation commensurate with skills, contribution and effort.

People should be promoted when they have the necessary skills. Both professional and interpersonal matter. Command and control is a poor leadership style.

Fairness requires the recognition of external factors. Family, for example. Businesses benefit when they recognize the need for life balance among their employees.

Growth

Every employee is motivated by personal growth. Sometimes it is as simple as an offsite seminar or the opportunity to learn some aspect of another position.

The cost is minimal and the value quite large. A business builds loyalty by caring and being involved.

I once heard someone complain about the cost to train people who leave. The wise executive asked what the cost was to not train them and have them stay..

Competent management

An employee should look for skilled supervision and wise leadership. Surprisingly less common than you would think. There are a good many managers that like their position more than their responsibilities. Learn how to manage them.

A common flaw is to promote properly based on skills that don’t translate into management skills. For example your best sales person is likely a weak choice for sales manager.

Good sales people tend to be independent and assertive. Some decisions are impulsive. A consensus of one. Results by their own skill and effort.

Managers should get results by having their team achieve. Independence is a blemish. Decisions with depth because must translate to the team. Consensus leads to buy in your team goals. Team leadership cannot be about unique skills and effort.

It matters. 

Most businesses that have employee problems author their own misfortune. Most government disrespect arises the same way.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com  866-285-7772

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Who Knows, Really?


Follow FarnhamStreet Blog

I have been a subscriber for some time and I think you would find it a useful site.  You can sign up here.

The stated purpose of the site is simple and its material is closely tied to its purpose.

“Mastering The Best Of What Other People Have Already Figured Out.

Or as the newsletter claims “A collection of signal in a world of noise”

The October 15 Newsletter is typical of the content

I have included one example from it here.

Finding Truth in History — Finding truth in history is about understanding that truth is not absolute, only relative. Read this to learn about how to use history to your advantage.

Using history to our advantage seems like a reliable advantage. Let’s see what thoughts we find:

  1. “If we are to learn from the past, does the account of it have to be true?” A very nice first sentence hook for the rest of the article.
  2. “This “problem of historical truth” is explored by Isaiah Berlin in The Hedgehog and the Fox: An Essay on Tolstoy’s View of History.”
  3. Tolstoy’s main problem with historical efforts at the time was that they were “nothing but a collection of fables and useless trifles. … History does not reveal causes; it presents only a blank succession of unexplained events.”
  4. “History is more than just factoids, but its complexity makes it difficult for us to learn exactly why things happened the way they did.”
  5. “This means that studying the past is important for making better decisions in the future. If we can’t always follow the course of cause and effect, we can at least discover some very strong correlations and act accordingly.”

The conclusion

Finding truth in history is about understanding that this truth is not absolute. In this sense, truth is based on perspective. The perspective of the person who captured it and the person interpreting it. And the perspective of the translators and editors and primary sources. We don’t get to be invisible observers of moments in the past, and we don’t get to go into other minds. The best we can do is keep our eyes open and keep our biases in check. And what history can teach us is found not just in the moments it tries to describe, but also in what we choose to look at and how we choose to represent it.

Tolstoy was seeking the primary cause of history.

The thing that if people knew it, they could explain everything and could estimate the future with high probability. He of course, never found the cause of all the causes, but the search, while a losing one, illuminated other ways of thinking.

We should take that lesson to heart. History is useful but not in the way we hope. It includes all the extraneous variables that influenced perception and the long chains of reasoning that followed. My son has often said, “Physics tells us more about how physicists think than about the universe.” same thing for history and historians. 

Perhaps a more telling comment relates to the problem of assigning a cause to any observed result. From a police officer friend, “I don’t believe anything in history, because I have, many times, seen two eye witnesses describe the same traffic accident. They don’t even get the colors of the cars right.”

History holds lessons for us.

But they may not be the ones we think. It is about discovering meaning. Real meaning not just a well told narrative.

If you rely on history for guidance, you might want to rethink your investment tactics.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com  866-285-7772

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