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Personal Finance: How Quality Can Save You Money

2012-02-05T17:21:00.000-07:00

Nearly 13 years ago I purchased a new backpack before starting university. At the time, I chose the backpack based on fit, size and because I knew it was similar to what the majority of students were using at the time. I didn't know it, but my new backpack would end up being one of the best purchases I have ever made.

When I purchased the backpack, a 30L MEC Brio (size no longer available), I paid roughly $60 for it and would have been pleased if it lasted through my first year of school. Had this been the case, it would have cost me $0.16 / day, an amount I was willing to bear for the sake of having a backpack.

Upon completing my degree, the same backpack still slung over my shoulder, I began to notice what a great purchase I had made. With my backpack still in like-new condition, I embarked on the next stages of my life and continued to carry it with me every day. It's come with me every day to work, wandered three continents and done everything else I've expected of it. It still looks great, I've never repaired it and it will soon be 13 years since I nonchalantly plucked it off the rack.

After about a decade of ownership, I made an important realization: My $60 backpack had already lasted 10 years, bringing its cost over time to less than $0.02 per day. Not only was my backpack still doing everything I needed, it was actually saving me money! Here's why:

Why Cost Over Time Matters

We all have to purchase things to get through life. Our individual needs may vary, but we all have the need to purchase things that we're unable to produce for ourselves. Some people purchase many things, others purchase few, but we all do it.

When most people make a purchase, their primary concern is to acquire the required item at the lowest possible cost. There's nothing wrong with this at all. Saving money at the time of purchase is certainly advantageous, however, since we're focused on our long term wealth, we also need to consider the cost of an item over the long term. This is where cost over time comes in.

Calculating cost over time allows us to understand how the price of a purchased item impacts us in the long run. This is very important, because it allows us to find financial savings we might not be able to otherwise. How, you ask? Allow me to explain.

Imagine that you need to purchase a new set of tires for your car (which you're planning to keep for a long time) and that there are two tire models you are considering. Tire A costs $80 per tire and is expected to last 50,000 kms. Tire B costs $100 per tire and is expected to last 75,000kms. Which do you buy?

Many people would examine this decision strictly by considering the price and choose to purchase the cheaper Tire A. Choosing Tire A saves the purchaser money upfront, but let's see what happens when we calculate the cost of the tires over time:

Tire A: $80 / 50,000kms of use = $0.0016 / km
Tire B: $100 / 75,000kms of use = $0.0013 / km

Tire B provides a savings of over 18% in the long run!

Why Quality Matters

But how do you really know how long a purchase is going to be useful to you? For something consumable (window cleaner, breakfast cereal, car tires, etc) the amount of use you can get out of your purchase is often easy to deduce. Window cleaner is sold in set volumes, breakfast cereal is sold by weight and car tires are sold with an advertised life expectancy. For items like this, it is easy to calculate the cost over time. For the breakfast cereal, you just pick the box that gives you the best cost to weight ratio. For the window cleaner, you look for the best cost to volume ratio, and so on.

What about other things though? What about a pair of shoes? What about a blender? What about a major appliance? It is far more difficult to determine the cost of these items over time because it's hard to know how long they will last. It is here that we enter the domain of considering the quality of an item.

Consider my backpack again. When I snatched it off the shelf, I checked that it fit me well and that it was the size I wanted. I did not, however, try to assess how well it was made. I didn't check if it was made out of rugged materials or if the stitching in key places was well done.

In order to determine the quality of an item you are purchasing, you have to be able to make some sort of judgement about how well it will be able to continue to serve the desired function. This can be difficult, because it may require you to understand a little bit about what you're purchasing, but it is here that you can save a lot of money.

Our world is flooded with different options for every imaginable product. Consider shoes. Even for a particular style, there are hundreds of different choices available to you. Thus, when we make a purchase, we have to carefully study the desired items to determine how long they will last. Here are a couple of tactics that can be used to determine quality:

Look carefully at the product and assess the build quality. Do the components look well manufactured? Are there weak points? Do the materials look like they would last a long time?
Read reviews. If available, reviews are a great way to learn about the quality of a product, as people that have had bad experiences will often write reviews stating their disappointment. If the reviews for an item indicate that the item is prone to malfunction, you should look at other options.
Trust your experience. Perhaps you've owned other items from a particular brand and have developed some trust in that brand's products.

When you've assessed quality, you're able to make a judgement about how long your purchase may last. Factoring this back into a cost over time calculation will allow you to identify potential savings. A higher quality item will often be more expensive, but it will save you money in the long run.

Returning to my backpack. No matter what, as long as I'm able to move around, I will need to own a backpack because they are my favorite way to carry things around. The backpack I purchased is still used every day and will be for years to come. Imagine for a second though that I had purchased a different backpack that wasn't as well made.

For example, it would have been very easy for me to go out and find a backpack of similar appearance and size for $25. Let's also assume that the less expensive backpack was not as well made and only lasted 2 years before needing to be replaced. Had I purchased said backpack, I would have saved $35 in upfront costs, but let's calculate the true cost of my decision over a period of 10 years:

My MEC Brio: (1 x $60) / 10 yrs = $6 / yr
Lower quality backpack: (5 x $25) / 10 yrs = $12.50 / yr

I think you get the idea. By purchasing a higher quality item, I've saved myself a pile of money in the long run, even though the upfront cost I incurred was far greater.

I've applied this lesson to countless purchases since my tough little backpack first showed me the savings that longevity can bring. Quality makes a difference and should likely be pursued whenever you need to purchase an item that you will use frequently and over a long period of time.

When you consider quality and make purchases with your long term needs in mind, you'll be freeing up future money to spend on investments and other things you can use to build your total wealth. I have every reason to believe that my backpack will last at least another 10 years and probably much longer. If it lasts me just 10 more years, it will have cost me just $0.007 / day to own and will have freed up lots of cash I may have otherwise spent on replacement backpacks.

Exceptions

I could have ended this post in the last paragraph, but I predict there are people who will contest my points on certain grounds, so I want to add a short corollary about exceptions to the above. Let me summarize the above into a simple rule of thumb: quality matters most for items that will be used a lot over a long period of time. If this rule doesn't apply to what you're purchasing, you should consider the item more on a basis of cost rather than cost over time.

Exception 1: Limited Use

My argument for quality does not stand for items that will experience limited use. If you're only going to need to use an item once, buy the cheapest one that will do the job and then get on with your life. Better yet, find a way to rent the item that you need. Things like special tools and disposable items fall into this category. A quality item will only save you money if you actually are utilizing the longevity of the item in the first place.

Exception 2: You're Good at Investing

My argument also fails if you're a person who is already really good at investing money. The spend now to save later mentality that I am promoting doesn't apply to people who are already very good at making their money work for them. If I, for example, could have used the $35 I would have saved by buying a cheaper backpack into $25 of new money every two years, the point of buying the quality backpack is completely moot. Saving money in the long term is only useful up to the point where it gets in the way of other growth.

Personal Finance: How to Calculate Your Net Worth

2012-01-16T15:17:00.000-07:00

Hi everyone.

My posts thus far have mainly been focused on setting goals and taking ownership of our lives. I'll certainly be writing more about those topics, but I'd like to break into another topic area that is always on my mind.

Personal finance.

I want to be wealthy. I want you to be wealthy. It's something that I want not because I'm a very material person, but because I seek many of the comforts that financial stability brings. Financial stability brings with it reduced stress over financial matters and increased opportunities to do the things that we want.

In the hustle and bustle of modern life, becoming financially stable isn't an easy task. If it's something that you've struggled with, don't be ashamed. There are lots of activities, side-tracks and even generally-accepted bad behaviors that carry us away from financial stability. The road to financial stability is not an easy one; it's one that requires huge amounts of discipline and a certain amount of financial understanding. Financial stability doesn't happen overnight. It doesn't happen by just having a stable job. Financial stability and building true wealth takes time, long-term planning and a commitment to your own personal long-term wealth.

When it comes to analyzing my own financial position and charting my progress, there is one calculation that I think matters more than anything else:

Personal net worth.

There are literally thousands of financial formulas that a person can learn, but unless you can calculate your net worth, you're going to have a hard time understanding your own financial situation and growth.

So what is net worth? Simply put, net worth is just the grand total of an individual or organization's assets (cash, property) minus their liabilities (credit card debt, mortgages, etc). Calculating net worth only requires some basic additions and subtractions to complete. It's first grade stuff.

Why is calculating your net worth so useful? When you calculate your net worth, the resulting number gives you an idea of your financial position with all things considered. Let me give you an example of why this is so important and powerful.

Imagine that you have a friend named Frank. Frank bought a home a year ago for $200,000 and had $5500 cash in his bank account after the purchase. To purchase his home, Frank made a 5% down-payment and mortgaged the remainder. When he purchased his home, Frank told you how excited he was to start building wealth and how gratifying it is to be a home owner.

At present, a year after his home purchase, you bump into Frank again and ask him how he's enjoying his house. He's overjoyed with how things are working out for him. He tells you about how he got a raise at work after purchasing his home and has been able to pay down his mortgage principal by $10,000 in the last year. To celebrate, he has just bought himself a new car for $17000 with 0% down and took a month-long vacation to Europe at a cost of $4,000 which he billed to his credit card. Frank also tells you that he still has the $5500 saved in his bank account and feels that he is on a great financial path.

You smile cautiously at Frank and wish him a good day. You worry about his financial future.

Why do you worry? Let's calculate Frank's net worth to see what's what:

Year 1 Net Worth: Assets - Liabilities = ($200,000 + $5500) - $190,000 = $15,000
Year 2 Net Worth: Assets - Liabilities = ($200,000 + $5500) - ($180,000 - $17000 - $4000) = $4500

Even though it looks like Frank is living a pretty good life, he has managed to decrease his net worth by $10,500 or 70%. Frank doesn't know it, but his past year has been a financial disaster. To make matters worse, his use of his credit card and car purchase will have saddled him with additional interest payments that will lay waste to his income. Despite what he says, Frank is not on a great financial path. Frank is marching towards bankruptcy and financial ruin. Don't be Frank!

How to Calculate Your Net Worth

Frank's situation is a scary example, but it's one that you may not have to look very hard to find, even among people you know. What's most important about the example I've provided is not the numbers involved but the percentage change year over year. If you calculate your net worth on a regular basis you can use the resulting values to track your progress towards wealth and financial stability. Here's how:

Once again, the formula for calculating your net worth is simple:

Net Worth = Assets - Liabilities

When I calculate my own net worth, for clarity sake, I like to break Assets and Liabilities down into small things. Here's the template I typically use:

Assets

P - Real property - Your house, apartment, land, etc. I generally use the purchase price of the property for calculation sake. If you want to be fancy, you can correct the purchase price for inflation, but be cautious of using the market value as this can fluctuate violently if conditions turn poor.
C - Cash - The money in your bank account. This should include money that you have set aside as savings.
R - Retirement Savings - If you have a 401K or an RRSP, you can include the total balance as an asset. Even though these funds aren't available for your immediate use, they do form an important part of your growing net worth.
S - Securities investments - Your stock, bond, etc. portfolio. Calculate the total market value of your current holdings.
OA - Other assets - Vehicles, equipment, etc. Be cautious of how you value items that fit in this category. I often exclude it all together. If you purchased a car a year ago for $10,000, it likely wouldn't fetch the same price if resold. Items in this category will be subject to depreciation and you should depreciate their value as required before adding them to your net worth calculations. Exclude all together items that you own that depreciate rapidly or can become worthless rather suddenly. For example, if you just bought a $2000 laptop, you should consider that money as good as gone. Don't count it as an asset, because if it breaks or is lost, it's worthless to you.

Liabilities

M - Mortgages - If you own real estate, you may also have a mortgage. This is a huge liability against your net worth. Be certain to include the amount of remaining principal you have left to pay off in your net worth calculations.
CC - Credit Card Debt - Credit cards are heavily used by many people. If you have credit card debt, you must include the remaining principal in your net worth calculations. Don't worry about including interest payments as liabilities, just consider what you owe. The impact of interest on your net worth will become very apparent as you calculate your net worth month over month.
L - Loans - Student loans, home equity loans, car payments etc. Take the principal owing of all other loans you have and include them here.
OD - Other debt - Personal loans, store credit, etc. If you owe any other money, be sure to include it here.

Obviously the above is just a guide. Use your judgement to create categories that suit your individual financial situation and always be conservative with your valuations of your assets. Based on the above, we can refine our formula to:

Net Worth = (P + C + R + S + OA) - (M + CC + L + OD)

Try calculating your own net worth right now. The result might surprise you.

When to Calculate your Net Worth

You can calculate your net worth as often as you like, but you should be sure to do it at least monthly. Over time, you net worth values will fluctuate as your financial position improves or worsens. What you want to see is that your financial decisions are creating growth in your net worth.

Calculating a percentage gain (or loss) against your net worth each month can be incredibly useful as you track your progress. Big purchases that you can't avoid or bad investment decisions might cause your net worth to fall, but your overall goal should be to see your net worth consistently grow. If you look at your net worth and see that month over month your net worth is growing by a few percentage points each month, you're on a good track.

Spreadsheet software such as Excel or Google Docs is a great way to record each month's net worth and calculate your growth. As with anything financial, use your net worth calculations to spot trends and identify opportunities for further growth and savings. Do it monthly, and I promise you'll find ways to improve your financial position and increase your net worth.

Trends to Watch For

As you calculate your net worth month over month, you'll begin to notice some trends. Here are a couple that may stand out:

Interest payments

If you have a mortgage or credit card debt, calculating your net worth will put the financial cancer of interest payments front and center in your life. If you make $3000 in a month in net income and know that your living expenses are $1000 a month, you would expect to see your net worth increase by $2000. If you have interest, it won't, and you'll know why. When you see the toll that interest takes on your net worth, I promise you'll be filled with motivation to pay down your debts.

Securities investments

If you have a stock market portfolio, you may see violent fluctuations in your net worth if the general market is performing poorly. Use this awareness to temper your stock investment decisions. If your stock positions could send your net worth into the negatives if the market faltered, consider revising your positions. Never put all your eggs in one basket.

Cash

If you have a lot of cash on hand, month after month, you'll likely start to recognize that it's not doing your net worth any favors. Cash in the bank doesn't grow quickly. If you have some to invest, research ways that you can use your cash to grow your net worth. You should always have some cash around for emergency situations (vehicle repairs, sickness, etc), but if you have a very swollen bank account, find a way to use the cash that will hasten your net worth growth.

You'll likely identify other trends as well. Study your net worth outcomes carefully.

Net worth is a simple formula with powerful implications. Use it!

Outlink: We're Making Less Than We Were Forty Years Ago

2012-01-16T10:30:00.000-07:00

Hi, everyone.

For the most part, I plan to use this blog to share my own thoughts on self-improvement and prosperity. Occasionally though, I'll also pass along articles and other material of interest for your consumption.

While reading on AlterNet today, an article on the falling income of men caught my eye. I share this article not because it was a particularly gripping read, but because it draws attention to a trend I believe will only become more damaging in the years to come.

The cruel fact of the matter is that we're working harder and harder all the time, and apparently, making less than we have in years past. This is a disturbing trend. Every hard working individual, no matter their career, race or gender, deserves some level of prosperity and personal satisfaction; a reward I think more and more of us are being denied despite the sweat on our brow.

The article doesn't provide us any concrete solutions to this problem, but let us use it as a reminder of the importance of diligent financial planning, education and an unwavering commitment to using our limited resources in ways that will bring us the most happiness.

How Goals Help you Reach Your Dreams

2012-01-15T21:17:00.001-07:00

Wow. This new year seems to be just flying by. I'm sure you feel the same.

On the tails of my last post, I've continued to think about goals and how they can help us become better people and reach our dreams. During these thoughts, it occurred to me that making goals is meaningless if you don't know what you want to accomplish in the first place. Goals may detail steps towards a better self, but they generally say very little about the broader dreams we have.

Consider personal fitness. Using the pattern for making goals I laid down in my previous post, a personal fitness goal might take the following form:

"Within the next 4 months, I will lose 10 lbs by not drinking soda and walking to work."

Read the goal again and consider this: What does a well-stated goal like the above actually say about the person who made it? It tells us that they want to lose 10 lbs, but it says little about what broader personal fitness dreams they have for themselves. A person wouldn't even make a goal to lose 10 pounds without first having the notion that their present weight is incongruent with their ideal self.

I believe that many people carry with them a mental image of their ideal self. This mental image may include information about how they want to look and act, what sort of wealth they would like, and so on. These mental images are a representation of the dreams we have for ourselves , and they are much larger and more complex than what can be encapsulated in a goal.

I don't want to overly emphasize body image, but as an example of what I'm talking about, picture your ideal physical self in your mind right now. If you're like many people, the image that you have of yourself isn't the way you look at present. I like to picture myself as a lean 200 lb man with thick arms, broad shoulders and great posture. I'm not that man. Not yet. But I do believe I could become him with enough work.

Does this mean that I should make a goal that says: "I would like to be a lean 200 lb man with thick arms, broad shoulders and great posture."?

Absolutely not!

As I argued in my previous post, a goal that lacks specificity and doesn't detail the "how" is a goal that won't take you very far. Goals need to be specific and they need to include some information about how they can be accomplished. In my opinion, they also need to be achievable in a time frame short enough to allow for regular reevaluation.

Therefore, my desire to be a lean 200 lbs is not a goal at all. It's much bigger than a goal; It's a dream I have for myself. We all have such dreams and I think it's important to know what they are before we start setting goals.

Dream Formation

Forming a dream can take time. Life is a journey with innumerable possibilities, and the distant horizon can be difficult to see at times. To further complicate our dreams, we change as time passes and desire different things over the years.

Dream formation starts when you permit yourself to think far beyond your present situation. A dream can feel larger than yourself and you needn't know all the steps required to achieve it. To form your dreams, start by asking yourself questions like: What do you most want to do? Where do you most want to go? What type of life would make you feel the most free?

Once you have a good picture in your mind about what you would like, find a way to cement your desire. Write your dream down for future reference. Create a 'dream board' full of pictures of the things you would like to achieve. Take steps that will help you keep your dream at the front of your mind.

Think of your dreams often, and use them to feed your goal-setting activities. Each goal you make should represent a step towards one of your dreams. This is why goals are so powerful; they represent specific, achievable steps towards what we truly desire.

Most importantly, never stop dreaming. Dreaming of what you want most can be a very invigorating experience. I've certainly found this to be the case in my own life. Dream big, and then use goal-setting to achieve all that you desire.

Making Better New Year's Resolutions

2012-01-04T00:03:00.000-07:00

As we've just sailed past new years, everyone has New Year's resolutions on their mind. A quick read of popular media will reveal that everyone is abuzz about how they can make 2012 their best year yet. It makes sense, because the dawning of a new year is a great time to reflect and adjust.

The decision of whether to make New Year's resolutions or not always comes down to personal preference. Some people firmly believe that they're not a great idea, others unfailingly recommit themselves to self-betterment goals with each new year. For those of you who do make resolutions, I thought I'd share some thoughts on the matter.

I'm often startled at how often several common resolutions are featured in resolution lists. Think about it, how often have you seen (or used yourself) one or more of the following New Year's resolutions:

Get into shape / lose weight.
Get out of debt.
Spend more time with friends.
Take more time off work.
Be better at managing time.

You've seen these before, haven't you.

Don't be ashamed if you've used one or more of the above yourself. Each one signifies a topic area in which innumerable people (present company included) desire improvement. There is absolutely nothing wrong with the topic areas that the above resolutions attempt to address. However, in my opinion, all of these resolutions, stated as they are, are severely lacking.

Let me explain.

Consider the worthy goal of getting out of debt. It's completely unquestionable that getting out of debt is a worthwhile goal to have, and it's perfect topic to create a resolution from. In my opinion though, in order to make such a resolution effective, we need to spend more time thinking about exactly what we want to achieve and how we're going to do it.

Be Specific About What You Want To Achieve
Creating a better New Year's resolution starts with being more specific. Desiring just to "get out of debt" is far too vague a goal to pursue. What is the time-frame? How much debt is there to pay down? How much progress could reasonably be made within the time-frame? All of these are crucial questions that should be answered when the resolution is formed. Without doing so, the person making the resolution is setting themselves on a course that is more likely to lead to failure and discouragement. Resolutions may not always be achieved, but they should always be achievable.

As you write your resolutions, consider stating them in a more specific manner and take steps to make sure that the goal you're making is both achievable and will encourage you to stretch yourself.

Getting back to our debt resolution, as an example, let's assume that I have $20,000 in credit card debt that I wanted to pay down. Let's also assume, that after my monthly expenses, I have $1000 left over. As this is credit card debt, I'm also aware that I will be subject to interest charges on the outstanding debt. I'm going to give myself a time-frame of one year to complete my goal.

Now I can form my resolution as follows:

"Within the next year, I will pay down my credit card debt to $8,000 or less."

A resolution like the above is far more specific than "get out of debt". By adding a few words, the resolution now contains a time-frame, a specific goal, and based on the parameters we thought through, we know it to be achievable. In addition, due to the added hurdle of handling the credit card interest expenses, we know that the resolution will still cause a sufficient quantity of strain to allow for personal growth.

Know (and Write Down) the 'How'
With our improved resolution in hand, we're ready to start thinking about the how. What must be done to achieve the goal?

Figuring out the how needn't be difficult. In fact, with a specific goal in place, it should be rather easy. Determining the how is just a matter of asking yourself questions similar to the following:

What steps must I take to achieve my goal?
What must I do to complete each step?

Turning again to my sample debt-reduction resolution, the steps I must take include things like making regular payments, finding new ways to save money and avoiding spending money I don't have to.

My resolution becomes:

"Within the next year, I will pay down my credit card debt to $8,000 or less. I will do this by making bi-weekly payments, only purchasing what I need and finding one money-saving activity a week."

More details can be added as needed, but for the moment, my sample resolution is in good shape, and it has the ability to set me on a path destined for success. As you write your resolutions, think carefully about each one and state them in specific terms that are meaningful to you. A new year is a great time to adjust your course in life, so make it count.

Happy New Year!

Maximizing Positive Outcomes

2011-12-28T19:06:00.003-07:00

After writing my post yesterday on Making Recreation Count, I reflected on the importance of maximizing positive outcomes wherever possible. As it related to recreation, I talked about the importance of ensuring that recreation was high quality. That's one example of maximizing a positive outcome.

I'm leaving my previous post as is, but I feel that the importance of maximizing positive outcomes merits more discussion, because for people keen on improving their lives, it's an absolutely pivotal concept.

Consider the following phrase:

Maximize positive outcomes at all times.

It's a truism for people who want more of the best things in life. It's a phrase to live by. It's a principle that should never leave your mind.

In the financial world, terms like return on investment, dividends and profit are used to identify the positive outcomes of financial investment. These are important terms, and perhaps we'll discuss them some time, but right now I'd like to point out that because our society is so focused on commerce and financial gain, I feel that the discussion about other positive outcomes can get lost in the mix.

Don't get me wrong, I want to be financially wealthy. I want you to be financially wealthy. But I want prosperity and well-being in other areas of my life as well, and that's why I believe that maximizing positive outcomes at all times is so important.

So, how do we maximize positive outcomes?

Know What You Value

Before you can maximize positive outcomes in you life, you have to have a solid understanding of what you value in the first place. Value is such an important thing to consider throughout all areas of life. How do you decide what you value? A few pointers:

First, if you haven't already figured it out, let me draw your attention to the following:

'Value' is a word that is horrendously misused.

If you understand the word value the way that big-box stores use it, throw that definition in the bin right now. Value has nothing to do with money. If you go to the supermarket, you're sure to see brightly-colored signs in all directions exclaiming that something (24 pack of soda, family-sized box of cereal, etc.) is "great value". This isn't a true statement, because a sale price does not affect the underlying value of the goods being purchased, it only affects the price you buy it for. What the store is actually doing is adjusting the value for money fraction in such a way to make the product seem more attractive to the consumer.

"Value" actually refers to "the importance or preciousness of something". This is what you need to focus on. Think about your life, and think about what is most important and precious to you. These are the things that you value.

This brings me to my second point: Value is completely subjective. You have to take ownership of your life and decide what is important to you. No one, not me, your friends, your coworkers, your parents or anybody else can do this for you. You, and only you, have to decide what you value.

As an example, consider personal fitness. Personally, I value physical endurance. It's important to me because I thoroughly enjoy cycling and riding long distances requires endurance. It is precious to me because without it I may not be able to ride to some of the locations I enjoy riding to.

Does this mean that physical endurance should also be important to you? Absolutely not.

You see. Subjective.

Analyze what you value. Write it down if need be. Once you do that, you're ready to move on.

Think About Potential Outcomes

As you likely do as well, I spend a great deal of time analyzing the potential outcomes of the way I spend my time. When it comes to maximizing positive outcomes, I believe that it is important to consider thoroughly what we stand to gain (or lose) from a particular action. No amount of effort upfront will make an activity worthwhile if the outcomes are inherently invaluable, therefore, we must think about potential outcomes before we take action.

Consider each potential outcome carefully. Each outcome will carry with it a certain amount of value that will be contributed to your life if you achieve the outcome. Using the value judgements you arrived at earlier, you'll be able to decide which potential outcomes are the most attractive.

Maximize Positive Outcomes and Execute Your Plan

Once you've considered each potential outcome, you'll be well prepared to choose a course of action. The course of action that you pursue does not need to be driven by only one potential outcome. Your decision to take a particular course may be derived from the collective value you feel you will receive from pursuing several potential outcomes simultaneously.

This is really where the word maximize comes into this discussion. Remember, you're focused on maximizing positive outcomes. There is a great deal of opportunity for creativity to take place here because there is an infinite number of ways you can mix-n-mash your life to extract the most value.

Consider a typical Saturday. You get up in the morning and decide that you would like to have a bike ride, spend some time with your friends and take a nap.

Let's arbitrarily decide that the above desires have the following value scores.

Nap - 5 value points / hour
Bike Ride - 3 value points / hour
Socialize with Friends - 6 value points / hour

Let's also dictate that you have a solid commitment later in the day and only have 2 hours to do the above.

What should you do?

If you choose hastily, you might decide to just pick the most valuable item (socializing) and do it for all the time that you have. Over your allotted 2 hours, this will net you a value outcome of 12.

However, if you focus on maximizing positive outcomes, you'll quickly realize that your desires are not mutually exclusive. You won't be able to nap and take a bike ride at the same time, and napping with friends doesn't won't allow you to socialize, but you can certainly invite your friends to come along for a bike ride. By focusing on maximizing positive outcomes, you've been able to discover a course of action that will provide you with the most benefit.

Let's say you spend 2 hours socializing with your friends, one hour of which you spent cycling with them. Now, over the allotted 2 hours, you have achieved a value outcome of 15. Yay!

I know I've given a silly example, but I hope it has helped to illustrate what I'm talking about. The cruel fact of the matter is that all of us are bound by time and resources. The repressiveness of these boundaries can (and should) be reduced over time as we improve our lives, but in the meantime it is crucial that we make the most of what we have. It's really important.

If you're not already maximizing positive outcomes in your life, give it a try. I've found it to have great utility in my day to day activities, and it helps me get the most value from my time and resources. It's the reason I listen to music while I cook. It's the reason that I go to the gym on my lunch break. It's the reason I'll never drive 30 minutes to the store just to use a coupon that saves me 50 cents.

Most importantly, it's what can help you do more of the things that you value most.

Making Recreation Count

2011-12-27T15:47:00.000-07:00

Recreation.

One of the 'R words' (along with rest and relaxation) that performance-minded and goal-orientated people struggle with. I have trouble taking time to recreate, and I know I'm not alone. Let me explain:

I define recreation as being any activity that is done where the goal in my mind is to achieve some level of personal enjoyment. This doesn't mean that recreating is without fringe benefits (e.g. becoming physically fit might be a fringe benefit of playing a sport that you enjoy), it just means that the core purpose of participating in the activity is to have some good ol' fashion fun.

So why does recreating cause problems for some of us? Everyone likes to have fun, don't they?

For me, and perhaps you as well, taking time for recreation creates a major dilemma. In general, my mind is wholly focused on activities and goals that I feel will bring me closer to where I would like to be in my life (wealthier, healthier, etc). This makes it incredibly difficult for me to enjoy recreation because in the back of my mind I feel that by recreating I am taking myself away from working on my goals. This is a huge problem because my thoughts interfere directly with my ability to enjoy the recreation in which I am participating, thereby partially nullifying the personal enjoyment I am receiving.

When it comes to recreation, I'm quite literally shooting myself in the foot.

After years of struggling with the above problem and speaking to others about it, I've come to find that there are two steps that should always be completed before participating in recreation:

First: Take Ownership of your Recreation

I spoke earlier about taking ownership of your life and how to do it. I think that similar principles can be applied to recreation. Before we participate in recreation, we must permit ourselves the privilege of said participation.

This is no small matter, nor is it something that can easily be accomplished. We all have a wide range of demands on our time and goals pending completion. When the time comes to recreate we have to be able to momentarily put these to the side and enjoy ourselves. I do this by considering all I must do and reassuring myself that I will continue my work when I am done recreating.

I give myself the permission to stop thinking about my goals and go have some fun.

Before you participate in some recreation, give this a try, because it can make a world of difference. You'll know when you get it right because your enjoyment while recreating won't be sapped away by thoughts of other priorities you have.

Second: Focus on Quality

Once you've released your mind from your other obligations during a time of recreation, the next thing you can focus on is making sure that the recreation is very high quality. Quality is important in all places, and a period of recreation is no exception. If you are going to take the time to have some fun, you may as well make sure that you have LOTS of fun.

Personally, one activity I enjoy participating in is cycling. If I consider all areas of my life, cycling serves three primary functions: I cycle to commute to work, I cycle for exercise and I cycle for the pure enjoyment of it. These functions are not mutually exclusive. For example, when I cycle to work, I do get a certain amount of exercise and some enjoyment from the ride, all whilst fulfilling my primary goal of getting myself to work.

This is why it is so important to consider quality as it relates to recreation. If I want to spend some recreational time on my bike, should I ride to my office? No. Should I do some Tabata intervals on a hill? Hell no! Those are approaches that add to the quality of other reasons I get on my bike, namely commuting to work and getting in shape. If I want to maximize my enjoyment while I'm out on a bike ride, I plan on taking a leisurely ride through a local river park so I can enjoy a great path and stop to skip the occasional rock at the river's edge. Not only have I allowed myself some recreation, but I've taken steps to make sure that the amount of enjoyment I receive is maximized.

Before you go out to have a some fun, take a moment to consider what steps you can take to make your recreation high quality. If you decide to play soccer, perhaps you'd have more fun if you played with friends. If you decide to play video games, perhaps you could unplug the phone during game-play so you won't be interrupted in the middle of an exciting gun battle.

Whatever form of recreation you choose, make it count.

5 Steps to Take Ownership of Your Life

2011-12-21T10:13:00.000-07:00

After completing yesterday's post, I thought further about what steps you and I can complete to take ownership of our lives. I already wrote about why taking ownership is important and how important it is to grant ourselves the opportunity to ask ourselves how we feel about our lives. For clarity sake, I thought it beneficial to break things down even further. I always find information most helpful when it has been broken down to its bare essentials, and that's what I've tried to do here for our collective benefit.

So, without further ado, here are 5 Steps to Take Ownership of Your Life.

Step 1 - Permit Your Own Feelings

This step should be a no-brainer, but I've included it because it's exactly where I got hung up. As I pointed out yesterday, I literally spent years not even permitting myself to realize the feelings I was having about my career. Day by day, I was hiding behind the assumption that "because I have a decent job in my field, I must be happy. Case closed.". I was completely wrong to think this way, and I may have lost valuable self-improvement time because of it.

So, Step 1 is to give yourself permission to examine your own feelings. If you've created a "no-fly-zone" for your feelings about a particular aspect of your life (career, health, relationships, etc), dismantle it NOW. If you're going to be in charge of your life, you have to permit yourself to understand your own feelings. Throw away any assumptions you have. Start fresh. If you have existing feelings about the topic in question, sideline those as well. What you need to be able to do is examine how you feel today.

Step 2 - Ask Yourself the Big Question

With your feelings on tap, ask yourself (aloud, if necessary):

"Am I happy with [...]?"

You can fill in the blank with whatever attribute of your life you are examining. "Am I happy with my job?", "Am I happy with my health?", and so on. Take note of how you feel. Write your feelings down if it helps you. You may discover some new things about yourself. I did.

Be as truthful with yourself as you can. Within yourself, there should be no judgement, so even if your answer to the big question isn't what you want it to be or think it should be, accept it all the same. The more accurately you identify your true feelings, the more appropriately you'll be able to target improvement later on.

Step 3 - Consider Your Options

Once you know your feelings, you're ready to start considering options for change, as required. Even if you are happy with the particular attribute of your life being considered, you can always look for ways to make things even better. More importantly, if you're not happy with how things are going, you can point yourself in a new direction and begin to make improvements.

Spend some time pondering what options you have available to you. If you don't like your career, perhaps you could start transitioning to a new one. If you're unhappy with your health, perhaps you could identify some areas for improvement. The more effort you put into this step, the broader your list of options will become. Even if you feel trapped, there will undoubtedly be a small way forward.

Capture the options you come up with in a way you deem appropriate. Write them down. Memorize them. Email them to yourself. You want to make sure that you don't lose track of what options you have. These are the off-ramps from your current situation and the on-ramps to greater happiness.

Step 4 - Act

Without a doubt, this is the most important step. As I've read about numerous topics, this step always comes up as crucial in one form or another. Any amount of planning or thought is meaningless unless you follow through with action. You don't have to do something enormous right off the bat, but make sure you do something, even if that something is seemingly small.

The reason for taking immediate action, in my opinion, is two-fold. First, it starts you actually moving in a direction you want to go. Even if change doesn't come immediately, you can rest assured that you are getting closer to where you want to be. This is enormously significant and will help motivate you for further action. Second, I've always found that taking action is a great way to discover new options that are available to you. In Step 3 you considered what options you have available to you. Once you start moving, you will discover even more of these.

Don't be disheartened if progress seems slow at first. If, for example, you're keen to get in better shape, even deciding to take the stairs between office floors instead of the elevator will move you in the right direction. Remember, you have to walk before you can run. So, take that first step, and don't delay.

Step 5 - Repeat

If you're going to keep your motivation and direction, you need to keep repeating the above steps over, and over, again. It may not be something you do daily, but you must do it often enough that your goals and desires do not become stale and foreign to you. With each passing day, you know yourself better and better, so you must keep reevaluating to discover new feelings, new options as you consistently take action for a better tomorrow.

Taking Ownership of Your Life and Why it Matters

2011-12-20T09:32:00.000-07:00

As I alluded to in my first post, I'm not quite satisfied with where I'm at in life. This feeling doesn't stem from terrible misfortune, nor is it rooted in a lack of basic necessities. I have, by any standard measure, been able to live quite comfortably for some time.

At present, I'm working as a software developer for a local organization. As far as software development jobs go, I have a pretty good one. The compensation is decent, I love the people I work with (awesome boss), and the hours are great. My job is not an uncomfortable place to be, and for that reason (and the need for a steady paycheck) I've kept showing up there for the last 6+ years.

Last year, while going about my day to day tasks as I always had, it occurred to me that I don't actually enjoy my job that much. Though this discovery was not triggered by any particular event, the realization of this fact completely floored me. It was painful. Every weekday, I was getting up in the morning, making an arduous commute and spending the day doing a job that I didn't get any personal satisfaction from. All this for a regular paycheck and the peace of mind that I could enjoy a comfortable, safe life.

After feeling frustrated (downtrodden, depressed, etc.) for a few weeks about what I had discovered, I made an even more painful discovery: I discovered that I had never even asked myself how I felt about my job. I had not asked:

"Am I happy with how I spend my time?"

Foolish.

Not only was I guilty of staying employed in career that was unstimulating to me. I was guilty of not even querying my own feelings about a job that was taking up a very large portion of my time and energy. I had foolishly deprived myself the opportunity to have feelings about my job. I was not taking ownership of my life.

But what is ownership? What does that mean? To me it means taking control of my life and thinking rationally about why I do what I do. It means being accountable to myself for how I'm spending my time.

Through this experience, I learned that when it comes to evaluating one's life, nothing is more important. Think about your life right now. Do you give yourself the liberty to discover your feelings about how you spend your time? Or, as I did, have you slipped into the numbing comfort of a safe path through life? Ask yourself now:

"Am I happy with how I spend my time?"

Taking ownership of your life starts with asking this question. It's a simple exercise in thought, but the answer has the power to rejuvenate your goals and give you direction anew. If you discover that things are not going the way you desire you can take action to make changes. That's putting yourself back in the driver's seat of your life. That's ownership.

Taking ownership of our lives doesn't mean that we'll make drastic adjustments, as these are not always an option, but it does give meaning to the possibility of change. It allows us to make small course corrections that will bring us closer to our goals.

In my case, I didn't go to work the next day with my resignation letter in hand, as doing so would have been horrendously reckless. In fact, over a year later, I'm still there. Would I like to have moved on? Absolutely. But in the meantime I get to enjoy the pleasant feeling of knowing why I show up each day. I know I won't be there forever, and for the moment my job is fulfilling a useful role in reaching for my goals. In a way, it is literally facilitating my eventual departure. When the time is right, I'll be able to move on.

First Post

2011-12-17T21:46:00.001-07:00

Hi everyone,

I've been thinking of starting a blog for a while now, so I'm very pleased that it has finally happened and I'm even more pleased that you've stopped in to give it a read. My decision to start a blog was not one that I made overnight. Instead, it was a decision that arose from countless feelings and thoughts that I've had over the last few years. This has been a long time coming.

So why do I want to write a blog? What am I expecting to get out of this experience?

I think, more than anything else, this blog will be a great way for me to sort through many of the thoughts that I've had over the last few years. As a guy in his early thirties, I don't think I'm alone in feeling that my mid to late twenties were some of the most thoughtful and difficult years of my life, and my thirties (so far) are shaping up to be much the same. I say this not to complain, but to give some context to the things that I would like to talk about.

For me, and perhaps for you as well, transitioning into full-on adulthood after university has been completely different than I imagined. Call me naive, but for whatever reason my unfailing optimism had me convinced that life would really smooth out once I finished my university degree (Computer Science) and found my way into a stable job.

Get an education. Get a job. Live happily ever after. That's how the story goes, isn't it? Did I fail to complete one of those steps? I got the education, I have a decent job, yet where I'm at right now doesn't feel quite like what I ordered. I'm not completely unhappy, but I will admit to feeling very disheartened many days that see me get up, go to work, take care of my other responsibilities all the while feeling like none of it is taking me where I want to go.

Like you, I desire health, wealth and general satisfaction from my life. I don't think that's too much to ask. In fact, I know that's not too much to ask. However, It's not an easy thing to achieve and although I see some people who seem completely contented with a 9 to 5 job and a few TV shows in the evening, I'm not one of them, and I know I'm not alone.

I want to get more out of my life. I don't just want more health and more wealth, I want more of whatever makes me feel like I'm living true to my desires. I don't want to live my life feeling like I'm biding my time as a meaningless drone. I want to live knowing that I'm taking every opportunity to do what I want to do, see what I want to see and create what I desire. Achieving this is a long process and it's something that I focus on every day.

As I've progressed towards my goals, I've learned many things by reading the thoughts and ideas that other people have shared on the Internet and in books. Writing this blog will help me organize what I've learned and it will allow me to give to others some of what I've found useful. I'm not where I want to be just yet, but I've come a long way in the right direction and I'm excited to share what I've discovered.

So again, thank you for visiting. I really am glad that you're here. I hope that you subscribe to my feed. I hope that you comment and participate in the discussions that will take shape here. Most of all, I hope that you find my content useful and that it helps you get more out of your life.

Welcome aboard.