How Many Lives Do You Touch?

Josh at Becoming Minimalist had a very thought-provoking post earlier this week about influence and how people are constantly striving to have more of it. The main idea of his post is that each of us already has a ton of influence.

Doubting Our Influence
It’s easy to fall for the belief that we are all just one little gear in the machine of life. It’s easy to believe that our individual actions do not have an impact on the world around us. With more than six billion people on the planet, that belief is certainly understandable. Maybe it’s just the lazy way out, but we often downplay our importance and use this to rationalize our decision to not be that positive, uplifting presence.

You Touch More People Than You Think
However, using the analogy of being a gear in the machine, you don’t have to actually touch every other gear to have an influence on them. Think about it. If you greet the person at the coffee shop with a smile and ask how their morning is going, if you hold the door open for someone at work, if you come home and give an encouraging word to your spouse, help your child do their homework or learn a new concept, and send a friend an encouraging message on Facebook (or even better, on the phone), that adds up to five influential actions. That’s five other gears that you’ve put into motion. And who knows how many other gears each of those will touch and put into motion, all as a result of your actions. There’s a new television show on Fox called “Touch” that does a pretty good job at illustrating this concept. One action done at the right time can trigger a series of events and have a positive influence on a whole chain of people.

The Ultimate Influence
Our little boy is now just over a year old. At this point in his life, virtually everything he learns is from my wife and me. As parents, we have a tremendous influence on our children. Consequently, we have a (smaller) influence on every single person our children will come into contact with. When you think about it that way, it’s easy to see how important it is to be an example of compassion, responsibility, integrity, and hard work. You may never actually meet the people you end up influencing; just know that you are making a difference.

Keep The “Personal” In Personal Finance

Personal finance sounds so simple, doesn’t it? I am an accountant by profession. I enjoy working with numbers, tracking progress, and working in spreadsheets. From that standpoint, personal finance is mostly made up of simple arithmetic. I know that I bring home a certain amount and that so much goes toward non-discretionary monthly bills (the must-have’s), so much goes toward discretionary monthly bills (the nice-to-have’s), so much goes toward groceries and other monthly spending, so much goes toward retirement savings, etc. I can do the math. I can see where the money is going. I can see the slow but steady progress of our finances improving. But there is a lot more to personal finance than math and numbers. There is a reason the first word in personal finance is “personal”.

Beyond The Numbers
When I make spending decisions, is it really about the math? To an extent, yes; but not really.

I know that when my mortgage payment is made that I need to subtract that payment from our checking account balance. I know that more than half of the mortgage payment is going to interest, taxes, and insurance, with a small portion going to pay down the principal. But what I think about most is that making that mortgage payment gives my family a place to live. It gives us someplace to call home.

I know that a portion of every paycheck I receive is deducted and put into my 401k. I know that by making these contributions consistently over my working years the balance will grow significantly by the time I reach retirement. My wife still laughs when I tell her that we’ll have a nest egg well above $1 million by then, based on maintaining my current contribution levels. I know the math behind it: how the sum of my contributions, the employer match, and compound interest over 40 years can really add up. But what I think about most is that making those contributions will give my wife and me a future where we aren’t relying on Social Security for our retirement years (if it even exists by then). I think about a future that is secure, where we can focus on things like spending time with our friends and family without worrying about running out of money.

Last night I went to the Dairy Queen drive-thru and bought my wife and I each a blizzard. From a purely financial (math) aspect, was this the best use of our money? No. Technically I could have put that money toward one of our loans or put it in savings. But we really enjoyed sitting at home eating our blizzards while our little boy was sleeping. It was one of those once-every-once-in-a-while treats that make life a bit more enjoyable.

It got me thinking. Focusing on the math is not the key to successful personal finance. It certainly is an important component of personal finance, don’t get me wrong. The numbers do matter, and you can’t ignore them. But if that’s all you think about, you’re leaving the “personal” out of personal finance.

Lessons Learned: My First Job

Every Friday I post about one of the lessons I’ve learned so far in life, both financial and about life in general. We’ve all learned valuable lessons along life’s journey, sometimes the easy way and sometimes the hard way. Hopefully someone will read what I learned and avoid having to learn the same thing the hard way. Check back every Friday for a new lesson learned.

My First Job
I’ve mentioned before that during high school and through most of college I worked a part-time job at our local Wal-Mart. I started right after I turned 16 years old and met the age criteria for most retail stores. A good number of my fellow high school students worked there as well, and I was always amazed at how quickly they came and went. They would work for a couple weeks or months, then get tired of working and quit. They saw it as a pretty lame job with nothing to learn from. A lot of them messed around a lot at work, didn’t take anything seriously, and eventually got fired. Maybe that’s just how “average” high school kids are, though certainly not all of us were like that.

I never really understood that. I’ve always believed that you can learn something from just about anything, and I applied that belief to my part-time job. I think working retail is one of the best things a young person can do. You learn how to deal with customers, how the supply chain works, how to deal with other employees, how to prioritize your job duties, and a wide range of other things that you can apply in your future. The thing is you have to actively seek out a lot of that knowledge. My managers were always eager to talk about how and why things worked, and they were always pretty surprised when I’d ask them about these things. I guess a lot of people just never think about the inner workings of their job or company. You’d be surprised at all the intricacies involved at a retail store, from the best methods of stocking shelves to the most efficient way of unloading a truck and getting merchandise out on the floor.

I worked at Wal-Mart for five years, until I landed an accounting internship during college. I always knew that my job at Wal-Mart was temporary, and so did my managers. But every now and then they would try and talk me into going into management. If I didn’t already have other career ambitions, I would have seriously thought about that.

No Such Thing as a Dead End Job
The point is that I don’t believe in the concept of a “dead end job”. If you take your work seriously and learn as much as you can from it, other opportunities will open up for you. It might be a promotion at the same company, or maybe the added skills and knowledge will assist you in landing another job elsewhere. Like most things, you can only get out of something as much as you put into it. If you go into a job with the assumption you won’t learn anything or get anything out of it, you probably won’t.

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”

Conclusion
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…

Stunted Growth

Earlier this week, Josh at Becoming Minimalist had a very thought-provoking post. In it he made an analogy between the bonsai tree and our own personal growth. I, for one, had no idea that bonsai trees (you know, those tiny trees that people prune all the time for art) are actually normal trees and will grow large just like any other tree. It’s the constant cutting, trimming, and pruning that prevent them from doing so.

The analogy was that, figuratively speaking, the same thing happens to us as individuals. All of us are born with a purpose and with great potential to make a meaningful impact on the world around us. But just like the bonsai tree we can be cut and trimmed to such an extent that we remain small, never to develop into the kind of person we could be.

Josh mentions several examples of such cutting and trimming (read them here), but another one that he doesn’t specifically mention is making poor financial choices. There are many poor financial decisions out there. I won’t go to the extent of Dave Ramsey and say that all debt is bad (I have debt), but debt certainly does limit what you can achieve and accomplish in your life. Our decision to go into debt today creates an obligation that we must honor in the future.

Maybe you have a dream to start your own business. If you have a huge mortgage payment, a new car payment, and a pile of credit card debt, then it becomes very hard to achieve that dream.

Maybe you have a dream to spend more time with your family. If you have to work 80 hours a week because you spend all your money as soon as you get it, then it becomes very hard to achieve that dream.

Maybe you have a dream to retire early and volunteer your time at community organizations. If you aren’t saving for retirement and are only living for today, then it becomes very hard to achieve that dream.

Just a little food for thought…