Wealth redefined
Ok, so maybe I’m a bit in love with rulesofthumb.org, but I thought this was hysterical:
Wealth is any income that is $100 more a year than the income of your wife’s sister’s husband.
Honestly, I wish I had read that before I wrote What is Wealth?, because I would have used that for the definition. But not because I agree with it. I definately feel like wealth is doing what you want, for whom you want, when you want, and nothing more. But it’s good to remember how other people think about it. If you’re judging your personal wealth based on some external yardstick, you probably aren’t wealthy at all.
Why old guys make more money than you do
… and what can you do about it?
I think its an established fact that if you are doing the same job as someone that is older than you, that older guy is likely making more money than you. And it sucks.
Older people make more money for a lot of reasons, and some of them actually do make them more valuable to an organization (experience can be key). However, I believe that most of the reason they are making more than you are is because they have less time left to work, and thus value their time at a higher rate than you do.
The funny thing is that if you start valuing yourself at that higher rate, you’ll probably end up getting it as well. Call it the power of positive thinking, or whatever, but if you think you are worth $x/hour, you probably are (or at least can be). I’ve talked a bit before about how I think my time is infinitely valuable, and because of that I’ve been able to get a lot of pretty significant raises over the years. I never had to prove that I was worth more than I was currently making – I just had to ask for what I wanted. I know a lot of career sites talk about how you should go into your managers office prepared to show him or her just how much you are worth to them, or are otherwise worth on the free market, but if you’re good at what you do and your manager is good at what they do, they already know all that.
Ok, so if that’s true, why do you even have to ask? Well, as it turns out, most managers are judged by how much profit they produce. If all of their employees are making a dirt cheap salary, but are seriously producing, the manager is going to get a big bonus (or raise, or whatever). So it’s in their best interest to give you as small a raise as they can get away with. Don’t let them play that game.
There are three things you need to do to get the raise you want:
- Know how much you want (be reasonable, but also be confident)
- Know when to ask for it
- Ask for it!
If you think you’re worth $45/hr (or whatever), then you already have #1 covered. But don’t think about percent raises. A percent raise is great for the company because it’s based on the past instead of the present. If they low-balled you when you were hired, if you keep excepting percent-based raises you’ll continue to lag behind your peers. Always talk dollars and cents, either hourly or as a part of a salary – percent raises are for chumps and are really only useful for determining how far you’ve come, not where you’re going.
Number 2 is actually the most important thing on the list (assuming you have the guts to ask) because every company handles raises differently. At one company I worked at, raises were managed way above who I directly reported to, and were handled on a quarterly basis. They also were in no way tied to my performance review. So when I wanted a raise (which they would only even discuss once a year), I had to ask for it early. Like 8 to 12 weeks before my performance review early. But you know what? That was just fine. I didn’t care that it would take them 2 months to get my raise through, and my manager was a lot more likely to help when he had the time to do it without it becoming a big stressor for him. Some places (usually smaller companies) can handle this stuff on a much more ad-hoc basis, but even then an accountant at a 10 person firm needs to know not to ask for a raise during tax season (actually, they should probably ask on April 16th, come to think of it, when all their hard work is fresh in their bosses mind).
As for number 3, lets be honest, you’ll never get what you don’t ask for – so go and ask! And don’t forget to be confident about it. Remember, you’re worth it. If your boss guffaws about whatever you’re asking for, either you got one of the first two pieces wrong or you’re working for the wrong company (or boss). To be sure, choke down your pride and ask your manager what it would take to make you worth what you’re asking for. You’ve already broached the topic of conversation – there’s no use in being shy now. Maybe you aren’t doing something right, or you need to take on additional responsibilities to justify the pay bump. If you don’t get a straight answer out of them though, you might want to consider finding gainful employment elsewhere – why throw your time away by giving it to an organization that doesn’t value you?
Happy, Fast, Rich – Pick Two
I saw this over on rulesofthumb.org today:
Good, Fast, Cheap – Pick Two. It can be good and fast but it won’t be cheap. It can be fast and cheap but it won’t be good. It can be good and cheap but it won’t be fast.
I like this, but I think I want to rewrite it to apply more to living a wealthy life – I feel like it should go something like this:
Happy, Fast, Rich – Pick two. You can be happy and rich but you won’t get rich right away. You can get rich quickly but you won’t be happy (probably because you’ll be in jail). You can be happy right now but you won’t be rich.
I’d rather be happy and rich even if it takes a while – what about you?
What is interest?
Interest [in-ter-ist, -trist] – a sum paid or charged for the use of money or for borrowing money – Dictionary.com
Previously, I’ve discussed how money = time, and how flipping the concept of time equaling money on it’s heels has noticeably shifted my perceptions about how the world works. If all of that is true, then paying interest (i.e. taking out a loan) is valuing current time more than future time. I think that is a huge mistake almost all of the time. And yes, that is coming from a guy who just a few years ago used a mortgage to buy a home (boy, do I regret that decision).
Why? Because the one non-renewable resource that we have is our time, and as we get older we have less of it. That’s why old people get paid more than young people. Not because they are more valuable (although a lot of times they are), but because the older you are the more you intrinsically value your time. I believe that if you could live your life backwards, you would never take out a loan (or pay interest on any money) in your entire life, unless you were sure it was going to be returned to you ten-fold.
The more I think about paying interest, I think it really equates to self respect. Do I respect myself enough to not spend time that I haven’t even had the opportunity to experience yet? Do I value myself (and my time) enough to say that I don’t want to sign away future time when it’s more valuable?
Think of it this way – if I save up money (time) for a while to buy something, because of inflation that time from the past is worth less than my time in the future. Past time is ‘worth less’ than future time because as you move into your personal future, there is more past time and less future time, making the times to come more valuable. Do you really want to sign that away?
Next time you’re tempted to buy something on credit, do yourself a favor. First, figure out how long you are willing to spend paying off the balance. Second, calculate how much money you are actually going to end up paying for whatever it is you’re buying (it’s probably more than you think). Third, calculate your true hourly wage – I like Trent’s take on this, even though I have a few tweaks I’d like to add. Then divide your total cost by your true hourly wage to determine how much time you will actually end up spending on whatever this thing is you are buying. Is it worth it? I’ll give you that this doesn’t exactly account for increases in your true hourly wage, but since you’re valuing now more than later, that doesn’t really matter, does it?
Ok, if you want to get fancy, you can use the following equation (this assumes that you will get a 4.5% raise every year to account for monetary inflation and a bit of additional self respect, and also assumes monthly payments) to determine what your average true hourly wage will be over your payment period:
athw = thw * [1.045*(n/12)]
athw = Average True Hourly Wage
thw = Current True Hourly Wage
n = Number of payments
So if your current thw is $25/hr, and it will take you 5 years to pay off your new $20000 car (which at 6.25% interest will actually end up costing you $24045.60) using monthly payments, your athw over that period will be $30.625/hr. By my calculations, that means that new car will cost you about 785 hours of your life. Worth it? Probably not.
What is money?
Money [muhn-ee] – any article or substance used as a medium of exchange, measure of wealth, or means of payment, as checks on demand deposit or cowrie – Dictionary.com
Money is a topic I’ve always gotten a real kick out of – not because I want a lot of it (ok, so maybe I do want a lot of it, but that’s not why I find it interesting), but because conceptually it’s slightly ridiculous and absolutely brilliant. I mean, people kill one another over little pieces of paper (or slivers of metal, if you’re talking about coins) – why?
The value (or lack thereof) of these little chits didn’t quite register with me until I was in college and I was sitting in some intro to economics class. I don’t remember the topic of the day, or how this came up, but the professor said something that has stuck with me since. “Money is an exchange rate for time. Tons of people will tell you that time is money, and they’re right, but the more correct thing to say is that money is time.” I’m sure I’m misquoting a bit there (it was several years ago), but you get the idea. I’m not sure why turning the concept on it’s head made it such a strong statement to me personally, but that day I decided something about myself, and it has colored my financial perception ever since. That day I decided that my time was infinitely valuable, at least when you compared it to green pieces of paper (or shiny bits of metal).
That day is the reason why I will shamelessly lobby for a raise at every opportunity, but on the flip side won’t even consider how much ’something costs’ if I want it bad enough or if I think it will bring me enough joy. I’m even OK getting nothing personally for my time other than knowing that someone enjoyed the fruits of my labor. However, I refuse to spend my time doing something I am not passionate about, because otherwise I’m just throwing that time away for useless pieces of paper. That idea has dramatically affected how I’ve directed my personal and professional life, because I want to actually live my life, not just have a lot of crap when it’s done.
For some of you, maybe that doesn’t ring true. If you want to work the numbers, think about it this way – I don’t know how much the last person to have an particular amount of money values their time, so me basing my ‘value’ on any number set by someone else (say, my salary) is completely arbitrary. And since my time is the most valuable thing I have (and I have a finite amount of it), I might as well consider it as precious as it really is to me.
What gets worse is that money, as a rule, is that time in the past is less valuable than time in the future (at least, that’s the perception), so you either have to constantly exchange it for other people’s money (time) via investment or allow inflation to eat away at it’s value. I’m not of the ’spend it now’ mind set by any means, but I also know I can’t take it with me, so if it’s going to last longer than I will it damn well better continue to work towards my goals long after I’m gone. Or something like that…
What is your dream?
Dream [dreem] – an aspiration; goal; aim – Dictionary.com
I’ve been spending a lot of time thinking about this recently, because quite frankly I haven’t a clue what it is that keeps me going some days. I was reading a blog post over on erica.biz about why people don’t save for retirement. She (Erica, I presume) spent some time talking about why people put off saving for the future, because to them the now is something that is tangible, while tomorrow isn’t something people can’t always seem to grasp. Or, at least that’s the lesson I took from the post, even if she was getting at something else.
It got me thinking about two things, really. The first thing is that people need to figure out exactly what is getting them up in the morning – what is their dream? I’m not talking about goals, I’m talking about that big vision for the future. Unfortunately, I don’t have a good idea in my mind of what that is for me personally – one of my personal goals for writing this blog is to figure that out. I have this sinking suspicion that determining what that dream is will be a big part of the “get happy” I was thinking about when I named this site. I’m sure I will be devoting a good deal of my time here on that subject in the future. What I do know is that retirement isn’t it.
The other thing it got me thinking about is perhaps a bit more shocking. I think people need to stop saving for retirement.
Now, before you go jumping down my throat about this, let me be clear. I’m not talking about not contributing to your 401k, stopping your IRA contributions, or anything crazy like that. I’m just saying retirement isn’t my dream, and honestly, I doubt it is yours either, so don’t bother saving for it. Instead, use those same vehicles (and probably the same, if not greater contributions) to save for your dream, whatever that may be. Of course, if it turns out your dream is something so radically different that those ‘retirement’ tools can’t be massaged to help you get where you want to be, then figure out some other way to get there.
Ok, so back to Erica’s blog post. Honestly, visualizing my retirement isn’t something that is really all that useful to me, but I hope that if I refocus it on my dream I will be able to figure out what exactly it is. Of course, maybe I’m over-reaching, and I should be focusing more on my near-term goals (mini-dreams, maybe? I think of goals as things that are easier to obtain than dreams…). What do you think?
What is wealth?
Wealth [welth] – an abundance or profusion of anything; plentiful amount - Dictionary.com
Honestly, I’m not a big fan of any of the dictionary definitions of wealth, but the one above was as good a one as I could find easily. For me, personally, wealth is the ability to do what you want, for whom you want, when you want. Really, wealth = freedom. Nothing more, nothing less. Notice I didn’t equate money to freedom – I think that’s a load of b.s., personally. It is certainly not about being ‘rich’, although I’ll admit being rich can definitely help you reach be wealthy.
I like to think about it like this – a retired guy who’s got a ton of cash but is bored with his life and everything in it isn’t wealthy at all. I’m sorry, but most retired people I’ve met fall into this category of affluent but miserable. On the other hand, a young guy making $5.15 an hour living with 6 of his friends making music in the garage on his off hours most certainly is wealthy. Why? Because the old guy has somehow gotten himself trapped in a situation where he doesn’t want to be, while the young guy is where he is because he wants to be there, and is happy about it.
The point I’m trying to hammer home here is that you can be happy without money, but you can’t be wealthy if you aren’t happy. So, rather than making it your life’s goal to collect as much money (or stuff, or whatever) as you can, maybe we should be making it our life’s goal to collect as much happiness as we can. Corny? Maybe, but I would rather be happy and broke (and still wealthy by my estimation) than be rich and miserable.
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So, you want to know what's up with the brackets in the name? "Curly brackets (also called braces, or "squiggly brackets") are sometimes used in prose to indicate a series of equal choices" and "Square brackets are mainly used to enclose explanatory or missing material usually added by someone other than the original author, especially in quoted text." So basically, if you really want to be wealthy in life, you have to figure out how to get happy. Since that whole spiel would make a crappy name for a blog, I decided to do something a bit creative with some brackets.
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