Success Factors

There was an interesting article at CNN Money this morning that talked about the income disparity between households in the top 20% and households in the bottom 20% between two 10-year time periods (1976 to 1986 and 1996 to 2006). Basically, the household income of the top 20% has grown pretty steadily while the household income of the bottom 20% has barely moved. The article also mentioned that there is less mobility between income levels. In other words the rich tend to stay rich, and the poor tend to stay poor. This kind of article always interests me because I grew up in a pretty poor family. I don’t think we were in the bottom 20%, but I’d put us as “working class”. Things were always really tight, especially with raising four children on my dad’s modest income.

With this being an election year (don’t worry, I’m not going to delve into anything political here), you hear a lot about the income gap. The term “class warfare” gets thrown in every now and then as if there is some kind of ongoing battle between the rich and poor. Personally, I don’t get into all that. For the most part, I like to believe that people can work hard and make a better life for themselves.

However, I do understand that there are a lot of things beyond our control that really can have a profound impact on our situation. One of the best books I’ve read in a while has been Outliers by Malcolm Gladwell. In this book, he writes about what makes successful people successful. A large portion of success is driven by a person’s work ethic and innate abilities. But another large portion of success is determined by random chance.

My Success Factors
There are a number of things over the years that I believe have greatly contributed to my rise from working to middle class (and hopefully beyond):

Household Dynamics: I was raised in a “traditional” home with a married mother and father. They had (and still have) a healthy marriage, and there was always that degree of stability in the home. We had very limited money, and I learned to manage my money carefully once I got a job.

Emphasis on Reading: My parents took us to the library every week, so we learned from a very early age that reading was an important part of life. Reading encourages thought and develops language and literary skills that are essential in life.

Innate Intelligence: I never had to work too hard in school to get good grades. I could listen to the teacher and do my homework, and the material would just “click” for me. This was particularly useful in high school and college because it allowed me to work a part-time job in the evenings without interfering with doing my schoolwork. Important note: I still had to do my schoolwork, but I was able to spend less time on it and get better grades than a lot of my classmates.

Work Ethic: I was always a hard worker in just about anything. Whether it was my schoolwork (I still had to do it, even though I mentioned before that it came easy), household chores, yard work, or my part-time jobs, I always made sure that I did my best. I’ve always been internally motivated to do well. I’m pretty competitive like that. This has helped me in many ways. My college accounting professor thought very highly of my work and provided a great reference that got me an interview that led to my current job. Important note: My professor’s reference got me the interview, but I had to perform well at the interview to land the job.

College Affordability: I live in a state (Indiana) that offered a lot of state grants based on a combination of need and academic achievement. Since I graduated near the top of my class with an Indiana Academic Honors Diploma and came from a pretty poor family with four children, I was able to attend a private four-year college and graduate with minimal student loan debt. Important Note: I still had to do the work in college, but I was able to afford to go due to all the state financial aid.

The Bottom Line
To a large extent, I am a firm believer that hard work is the most important thing to a successful life. I wouldn’t have been able to get where I am today without having the work ethic to make it happen. But I also know that I’ve been pretty lucky as well. My hard work paired with a few “lucky” breaks is the key to the progress that I’ve made. The key is to take advantage of those chance events when they happen, but realize that oftentimes it’s your hard work that helps lead to those lucky breaks.


The Law of Inertia

A major component of success is having the willpower to actually do something. This is certainly true in regards to personal finance, but it is also true in many other facets of life. And of course, since it is such a major component of success, it also tends to be one of the more difficult things to master. Isaac Newton captured the idea quite well when he documented the law of inertia. He stated that an object at rest will remain at rest unless acted on by an unbalanced force. This is another way of saying that your situation, task, to-do list, debt burden, etc. is not going to change unless you act upon it.

Take a look around, and it’s easy to see this in practice almost anywhere. Listen and you’ll hear a lot of people complaining about their lot in life. People hate their jobs, never seem to have any money, have unhealthy relationships, can’t seem to get ahead, etc. However, one commonality among this is that quite often the people doing the most complaining are the least likely to actually do anything about their situation. It seems so simple: if you keep doing the same thing the same way, you’re going to be in the same situation. But trying to make changes in your life can be very difficult.

Even on a smaller scale, we all have little projects that are on our list of things to get done that never seem to actually get done. I’m certainly not exempt from this. I can name a few right now:

– Our upstairs bathroom has a squeaky hinge. I have to be very careful in the mornings when I’m getting ready for work not to move the door too much, because it will wake our little boy down the hall. I make a mental note of it every morning and tell myself “I need to get some WD40 and oil that hinge.” Our little boy is now a year old, and I think I’ve been telling that to myself for the entire year. Yet this morning when I was getting ready, the hinge on the door still squeaked. I made another mental note to buy some WD40 and oil the hinge.

– Since we moved into our house in fall 2008, the downstairs half bath / laundry room has had a burnt out light in it. The room has multiple light sources, so I never bothered to replace the one that was burnt out. It was one of those long, florescent overhead lights. I’d never changed one before, and thought it would be difficult and that the bulbs would cost more than standard ones. This weekend, we finally replaced the burnt out bulbs. It was super easy, and the bulbs were pretty inexpensive. The room looks a lot nicer with the extra lighting.

– We had a regular trash can in our kitchen. It always seemed to be in the way, and the lid didn’t stay on too well. My wife always complained about it and told me she wanted one of those under-the-cabinet, slide out trash bins. They’re more convenient and would clear some floor space in the kitchen. I added it to my mental “to-do” list and kept it there for three years. It was just easier to leave our current trash can in the kitchen. But finally I took the action, went to Lowe’s, bought the under-the-cabinet trash can, and installed it. It really is a lot more convenient, and the kitchen looks a lot nicer with our old trash can out of there.

All three of those situations have some common characteristics:
1. They all required me to go out and purchase something to be able to complete the task
2. They all required me to take time out of my day to work on the task
3. Once the task was completed (though the first one isn’t yet complete), I looked back and said to myself “I should have done this a long time ago”

The point is that it takes a concentrated effort to generate enough inertia to get things done. It’s always going to be easier to leave things the way they are now, but that doesn’t solve the problem. Your hinge will always squeak, the lighting will never be as good, and the trash can will always be in the way. Sure, you’ll get used to those things and come to think of it as normal. But, imagine how much better it would be if you actually took the time to take care of the situation. Just a little something to think about as you start your week…

Party Planning

Tomorrow is our son’s first birthday party, and my wife and I (mostly my wife) have been busy with the party arrangements. Food has to be prepared and/or purchased, cupcakes need to be baked and decorated, and it seems like a hundred other things have to be done as well.

On the one hand, I can’t help but think how the traditional 1st birthday party is kind of overdone. The birthday boy doesn’t even know how to say the word “birthday” let alone comprehend its meaning. In the grand scheme of things, Tyler isn’t going to remember this birthday.

On the other hand, I know that this party is as much for my wife and me as it is for Tyler. Looking back, it’s hard to believe it’s already been a year. It is definitely something worth celebrating.

Having A Good Party On A Budget
Now, this post wouldn’t be complete with at least a little bit of personal finance mixed in. So let’s discuss how to put on a good first birthday party without breaking the bank.

1. Avoid party stores and pre-made party supplies.
Have you looked at the price of birthday party supplies at the store recently? First of all, if you already have a theme in mind it can be difficult to find what you want at the store. Second, themed party supplies at the store are expensive.

We wanted to have a “Very Hungry Caterpillar” party since that is his favorite book. Stores simply don’t carry party supplies with that theme, and party supplies online were outrageously priced. But if you do a google search you can find hundreds of do-it-yourself party ideas that are very inexpensive.

So I designed invitations on the computer and printed them myself. We printed some neat decorations and found lots of neat ideas, including how to make a caterpillar out of cupcakes.

2. Buy paper and plastic products at dollar stores.
We’ve found that our area dollar store is the place to go for colored table clothes, napkins, plates, utensils, etc. The same items at Hobby Lobby or Michael’s always cost at least two or three times as much.

3. Work with friends and family to prepare the food.
This is another thing where it pays to go the do-it-yourself route. Buying an already-made meat or veggie tray at the grocery store is quite expensive. It costs a lot less to buy the individual items and do the arranging by yourself. I understand that this would be a lot for one person to do alone, so ask friends and family to help out.

4. Keep in mind the purpose of the party.
Too many people obsess over party details and try to make everything absolutely perfect. But the point of the party isn’t about the detail of your decorations or the way the cake looks. It’s about family and friends getting together to celebrate a special occasion.

Our Cake
This morning we made our caterpillar cake, and are quite pleased with how it turned out. I thought I’d share a picture.


Your Party Tips
Do you have any party planning tips? Share your story in the comments section below.

Decide What’s Important

This morning’s post over at Becoming Minimalist was really good, so I thought I’d share it with everyone. Josh talks about remembering what’s most important. Several of my posts refer to focusing on what is important to you, both in terms of your spending and in terms of your time. He does a really good job of getting the point across in terms of identifying your main values using the following steps:

1. Grab a piece of paper and pencil.
2. Across the top, write “What I Most Want to Accomplish with My Life.”
3. Write down whatever comes to mind.
4. When the moment feels right, stop.

I know that personally, the single biggest factor in getting me to remember what’s important was having a child. From that point on, life was no longer about me or even me and Amanda. We were now completely responsible for another living, breathing person. His needs have to be met, regardless of what Amanda or I have planned or would rather be doing. It really makes us stop and think, “What were we doing with all our time before he arrived?” I can’t think of anything that we no longer do that I truly, deeply miss. We still have our time in the evenings when Tyler is asleep to talk and just spend some quality time together. It’s true that now we have less time for that, but we’re aware of that and make sure to enjoy the time we do have.

Not that there aren’t areas that I’d like to improve on. I know I can be a better husband, and I need to work on that. I’d like to do more community-service related activities, and I need to work on that. I know I can manage my time better and get important things done, and I need to work on that.

Take some time and read Josh’s post and complete the exercise he mentions. We only get one life. We need to make the most of it.

Effective Time Management

If there is one thing we all wish we had more of, it would be time. With everything we have going on, 24 hours just doesn’t seem like enough. If you figure 9 hours of work, 6-8 hours of sleep, travel time to and from work, time spent on housework, time spent with the kids, time spent at the grocery store or on other errands, it all seems to add up to more hours than there are in a day.

Since there will always be 24 hours in a day, the only thing we have any control over is how we can best utilize those hours. The question is how. How can we structure and prioritize the hundreds of “tasks” we face everyday?

A couple years ago I picked up a book (for free at the library, of course) by Stephen Covey titled “The 7 Habits of Highly Effective People.” It was a very interesting books with a lot of ideas about how to, you guessed it, become more effective, both in the workplace and at home. Anyway, one of the things mentioned is the idea of thinking of anything that takes up your time as being in a 2 x 2 matrix, with four quadrants. I know what you’re thinking: “Matrix? Quadrants? This sounds overly complicated. I just want something simple.” Well bear with me here, because it really is simple.


The Four Quadrants
Everything that takes up our time can be put into one of four categories:

– Important and Urgent
– Important and Not Urgent
– Not Important and Urgent
– Not Important and Not Urgent

Important and Urgent
This category is for those tasks that have to be done and have to be done soon. These are the emergencies and upcoming deadlines. Your air conditioning goes out in the middle of a 90 degree week or you have a project at work due in a couple days. You really have no choice but to spend the time necessary to get these things done.

Important and Not Urgent
This category us for those tasks that need to be done, not not necessarily right away. Changing the oil in your car or replacing your furnace filter are good examples. Updating the wording in an office memo template or rearranging your workspace to make things more efficient are also good examples.

Not Important and Urgent
This category is for tasks that are mostly interruptions. We’re in the middle of working on something, and we get a telephone call. The call itself may not be that important, but the ringing phone makes it urgent. You’re spending some quality time with you wife or kids, and you receive a text message. The message may not be important, but the beeping notification makes it urgent to check.

Not Important and Not Urgent
This category is for tasks that don’t really serve a purpose. You spend an hour after work watching television or playing a video game to “unwind”.

Prioritizing Tasks
The trick to better time management is to gradually spend more and more time on the two “Important” quadrants. It’s easily spend time on the important and urgent tasks. If those don’t get done there are serious consequences. But it’s easy to neglect the important and not urgent tasks. There is nothing there to drive your attention to those tasks, since they can be out off until another time. But what happens when we neglect to spend time on them is they move from important and not urgent to important and urgent. If you don’t maintain your vehicle, then it eventually breaks down and takes more time and money to fix than it would have taken to simply maintain. If you procrastinate on a long-term project, it eventually comes an emergency that you’re forced to spend much more time on all at once.

While it’s easy to neglect the important and not urgent asks, it’s also just as easy to put too much time into the not important and urgent tasks. Not every phone call, text message, or email is important and worth spending a lot of time on. Be aware of this and let the caller know that you’ll have to get back with them later. Don’t keep your email open all the time, but set a specific schedule for checking emails.

And try to limit the time spent on not important and not urgent tasks. I understand the need for relaxation and entertainment, but be mindful of how much “downtime” you’re really taking.

Bottom Line
By consciously asking yourself which quadrant the task you’re currently spending time on is in, you can make sure you focus on the important things.