The Power of Small

I am mid-way through Malcolm Gladwell’s ‘Outliers’. This is another in his oeuvre of shining an inquisitive light onto ideas that we thought were settled…but that actually rely on folklore to survive. He’s a truth-teller I guess, applying clear-headed logic to neglected parts of our social civilization. Outliers attempts to figure out how mega-success in business (like that enjoyed by Bill Gates and Larry Ellison) can be applied to our own lives. It’s fascinating. We all like the stories of others’ fame and fortune so we can dream.

At some point the book will turn to applying one-in-a-million rocketship rides to our own less glittering lives. If you weren’t born in the right year, if you didn’t take up computer coding, if you didn’t struggle with out-of-fashion business ideas, then your life will not be as shiny. Don’t despair: there is something from Jeff Bezos’ life we can harness.

Which does not jive with my view. Yes, people might wonder what it’s like to be Donald Trump. Yes, they might even find themselves envious of the private jets and beautiful suits. But most of us understand that life’s just not like that. We think that mega-people leave sadness, disappointment and tears behind…but that is nuts. Of course they don’t. Money allows you to say “no” more often, but doesn’t exclude you from the complex up and downs of our social and physical universe.

So let’s not spend any time thinking we need to emulate the big boys. We all have our own pathway to bliss. First we need to define that, of course. Then we need to work, study and create the right attitude to stay on that path. Lots of small successes on that roadway will do more than any completely unlikely lottery-win one-off. The process is the thing.

Money is the mortar holding our house together. That’s where I’ve found myself, understanding clearly that the less time you need to spend making the money to keep your life moving forward, the sweeter the path. The other way works too; reduce your need for money as much as possible and you can do more with less. (This does have a limited possibility of improvement though. There is a floor defining the least amount of money your budget requires. You have to make some dosh to buy socks.)

 

Through the Looking Glass

Your job is your most valuable asset. I stole that from Dave Ramsey, but figure that an attribution will make it okay. Your job, as Dave might say, creates the boundaries of your life, not in a spiritual way, but in most practical ways.

For instance, if you spend more than you make, you’ll have to make up the difference with borrowing or sale of assets. Borrowed money removes the control you have over that part of your income you need to pay the interest, thereby reducing the value of your job. Every hour you work then becomes less your own, and more someone else’s. Banks and payday lenders and car dealerships happily encourage you to spend much of your working day working for them.

Your life boundaries get a little tighter with every reduction of your income.

On the other hand, spending less than you make expands your life’s boundaries. Money saved or invested is a down-payment on freedom. Let’s think about a job as being a tactic to get where you want to be in life. The idea is to make the job optional.

This theme is important to me at the moment because I am pretty much obliged to work every weekend for a while. When you’re already working 55 hours a week, the additional eight or ten raise questions, like ‘Is this Sunday night really worth the one-off increase in my pay check? Wouldn’t I be better creating something that pays me when I’m NOT working?’

Of course I would. When you work for an hourly wage or even a yearly salary, you only get ahead to the extent that you can save and invest. It’s a (frightening) example of diminishing returns, because we all have only limited time. This extra hundred bucks needs to be re-earned every weekend, hour-by-hour.

There is be a better way. There is a way to expand my income with every hour spent, not limit the ratio to 1:1.

I plan to walk through that looking glass into a much smarter world.

Multiple Personality (But Not In a Weird Way)

I notice the following in myself; that I can hold several different – and oftentimes contradictory – beliefs in my head simultaneously. For instance, I know that I should be making at least five sales calls per week, on my free day, Monday. But I don’t because I justify the fact that I like to go for a swim, have coffee, do my laundry, take time to do some cooking, complete the housework…anything, in fact, to avoid doing the one activity that will change my life.

I feel like there are six or seven different streams of experience going on in my head, from which I can choose the appropriate excuse. There’s the experience of being a child and the modelling of my parents. There’s the lazy Tim who would rather read a book and drink coffee. The other side of that is ambitious Tim, who understands that to make change, I need to make things happen (like sales calls). And then there’s the detached me who can just sit back and philosophize about this.

As an aside, I think that this is a cause of stress in our lives. The greater the difference between our aspirations and what we actually do, the greater the mental friction. But that’s for another post.

So when difficult or new things present themselves, we can choose to face them and do the hard things, or we can choose a different stream of thought that stops us doing so. We’re all capable of extreme avoidance. (And although I don’t know you, I can say that because it’s my blog, plus you know it’s true.) Think of cigarettes. Does anyone believe these coffin nails are in any way of benefit to you? No. It’s the choice of streaming video in our heads that allows us to ignore the horrors and go suck on another Camel.

The secret about this is that it’s no secret. We all understand that most of us tend towards less action than more, to fudging rather than standing up. The folks who really do excel in life are those who seize opportunity, prioritize intelligently and relish the change.

Ah, change. That constant companion from whom we so like to hide.

Money, It’s a Gas

In a perfect world, folks would have a clear idea of their finances. We’d all face up to our money – or lack of it – regularly and dispassionately. But the world is not like that. We’re not like that.

Money creates enormous roadblocks in people’s lives. Too little of it is an obvious problem, but too much can be destructive as well. It’s part of my journey to figure out how to place money in its proper place in our lives, in my life to start, and hopefully others thereafter.

A few thoughts: One, there are way too many people in America who live from payday to payday. Secondly, way too few people have any kind (let’s underline that) any kind of savings. Thirdly, most of these people have no plan to change either of these predicaments. Hope and, well, more hope is their preferred tactic.

This will not work.

On the basis that the way you think is more important than anything, we need to find a new way of thinking about spending, saving, debt, rainy days and the most important element, our incomes. My thinking is to create recurrent income separate from your wages or salary, growing the passive income to eventually supplant whatever you make from your job. That’s what I’m doing.

But you need not follow my plan to the end to make a difference. Creating even a small amount of recurrent income can make a lifetime of difference, and here’s an illustration:

I Tweeted earlier that in the next forty years I’ll spend more than $30,000 dollars on electricity. That figure will be way under, because I simply multiplied my current bill by 480 months. Inflation, increased energy costs and who knows what else will almost certainly make that much, much higher.

Now imagine if you created $65 per month of recurrent income for yourself. You would never have to worry about paying the electricity bill ever again, which would be a relief to many. And the money from your salary that would otherwise go to paying the electricity bill could be used for something else. Saving for emergencies for example, reducing the principal on your mortgage or adding to whatever retirement arrangements you have.

$65 dollars per month, $30,000 dollars overall, and that’s before compounding. Small change, big outcome.