July 10, 2008

More Income Doesn't Always Build More Wealth

When it comes to your financial health, income is the least important factor. There are millionaires who are miserably in debt!

The Hope of More Money
Assuming I'm normal and that you're normal, I suspect that you (as I once did) assume that the best solution to money problems is more money. That is, if you find yourself struggling to make ends meet, then earning an extra thousand dollars would make all the difference in the world. Sometimes what can help us get through the day is the hope that a life of ease and pleasure is only one lottery ticket, rich uncle or lawsuit victory away.

A Parade Of Poor Decisions
I spent a year and a half as a consumer credit counselor, and during that time I discovered something that I had never fully appreciated before: your financial health isn't even remotely related to your income! I met with over 1,000 families, but learned after only three days on the job that there is no "type" of person who has insurmountable credit card debt, especially not in terms of income. Some earned less than I did and were doing quite well -- their biggest problem was trying to figure out how to tighten their budget to put even more savings aside. Such clients, at any income level, were rare indeed.

I also met several people that earned many multiples of my own income -- one client's annual "bonus" was actually more than my annual salary! But all of that money didn't solve his money problems. It's a logical impossibility -- financial health is built by wise spending, not by extraordinary income.

Working The Other Half Of The Equation
Unfortunately, people get so hung up on the income side of the equation that they begin to feel helpless and hopeless. After all, how much influence do most people really have over their income over the coming week?

But you have far more control over your financial health than you might think.

Financial health is really just a matter of continuing to build savings over time. If you have more money in savings at the end of the month than you had at the beginning of the month, you just got richer. It really is that simple. You just have to look at the other half of the equation.

When you focus on increasing your income, your control over your financial health begins sometime in the future. Your have to wait until you get that raise, get a new job or become famous. But when you focus on your spending, you have immediate control over your financial health beginning today.

Watch Your Spending To See More Savings
The best way to reduce your spending is to start tracking it. When people actually sit down and see how much they are spending, they are horrified. I once bought a couple bottles of pop every day on my way to work. But when I eventually sat down to analyze my spending and saw that I was spending over $40 a month on pop, I don't need to tell you that I began to improve my financial health right then and there.

When you analyze your spending with the understanding that every dollar you don't spend is making you richer, you naturally begin to make wise financial decisions. So, are you going to end this month richer or poorer?

Also At Babblermouth:
Financial Freedom Series 1 -- Cause and Effect
Financial Freedom Series 2 -- The Value of Values
Financial Freedom Series 3 -- Money

From My Bookshelf:

This classic book shows, through a series of parables, how to dig out of seemingly impossible debt while at the same time becoming very wealthy. It is a small book, densely packed with financial wisdom.

April 27, 2008

Poker: It's Not About The Money

The more I play it, the more I become convinced that Poker is the finest card game on the table. It has an unfortunate stigma because of its ties with gambling (which can be devastating when abused), but that stigma us undeserved. Poker is a remarkable game that perfectly blends both skill and chance, and can be thoroughly enjoyed without even one penny exchanging hands.

It's Not About Money
I of course cannot ignore that one of the biggest draws of poker is the high-stakes poker that you can watch on TV. Anytime hundreds of thousands of dollars, or even millions of dollars change hands within the span of only a few minutes, you have yourself a pretty exciting spectacle.

While the prospect of winning money through some well-played gaming is certainly enticing, my experience has proven that the game can be very engaging without even one penny changing hands. In fact, I've never played poker for money. I prefer it that way. By focusing only on winning the game and not on winning the money, I am able to play my best and learn from my mistakes, while avoiding having to actually pay for my mistakes.

The Mark of a Good Game
I am a game-playing fool. Whether it's video games, board games, parlor games or mind games, you can talk me into playing anything once. And if it's a great game, I risk becoming obsessed with it!

So, what makes a game great? I think it is best defined as the perfect mix of simplicity, challenge and luck. Poker scores high on every measure.

Let's face it. If a game has too many rules, you eventually find yourself spending more time thinking about the rules than about playing the game. Go Fish, for instance, is remarkably easy to explain to somebody (which is why it's such a popular children's game). Many collectible card games such as Magic The Gathering or the now defunct Star Wars game produced by Decipher, however, tend to dilute what are initially simple rules with the introduction of new expansion sets that either update the rules or present new exceptions.

The most difficult part of learning to play Poker is understanding the ranks of hands. That process is dealt with simply by providing newcomers with a list of the relative values. Betting is easy enough to understand, too: when it's your turn, you match the previous bid (if there is one) or increase the bid. It's not Go Fish or 52-Card Pick-up, but Poker is easily learned in only a few minutes.

Learning to play it well, however, is another story. In poker, you learn quickly that even though you understand the rules, there are still volumes of information about the game that you have yet to learn! To play well, you need to develop a number of skills that challenge you to amass the fullest strength of your powers of concentration. Slip up at all and you'll lose to somebody else that's paying better attention to details.

It surprises people to learn that poker is very much a game of skill. Things like understanding probability, remembering what cards have been played, discovering the other player's betting styles and being careful not to keep your own playing style a secret can certainly keep you on your toes!

For me, the allure of poker is that in the end, the actual value of your hand doesn't matter. If you aren't playing well, you could win $10 with four aces, and lose $1000 in the next round to somebody that only has a pair of kings!

But what would poker be without the element of luck? I would argue that luck is that part of the game that keeps people coming back to it. Luck gives a weaker player the hope that he can still win, while at the same time keeping even the most experienced players humbled.

To understand the importance of luck, consider chess. Chess involves no luck whatsoever (unless you count those times when your opponent doesn't recognize that he can checkmate you in two moves). Assuming that both players know the rules of chess, it becomes only a game of strategy versus strategy. If you are playing a significantly better player, you have no chance of winning. And if you've played a significantly better player, you will know what I mean!

With poker, however, it's quite easy to have a scenario where a clumsy player has been playing recklessly throughout the game. A better player then gets it in his head to teach the careless player a lesson and ropes him into betting more and more until finally he's "all-in". But when the cards are turned over, the reckless player takes it all!

The Perfect Mix
So, there you have it. Poker is the perfect card game because it's a perfect blending of simplicity, challenge and luck. And most importantly, you don't even need to risk any real money to enjoy the game (you do, however, have to really want to win).

Also At Babblermouth:
A Pirate's Life For Me
SET: More Fun Than Reading The Directions
Financial Freedom Series 1 -- Cause And Effect

February 28, 2008

Jaywalking: So What?

I have a confession to make. The "Jaywalking" segment on NBC's The Tonight Show used to really worry me. Watching and listening to the ignorance demonstrated by the people in those segments used to actually create physical pain in me and a very real fear about the future of America.

But now I'm not so concerned.

Unapologetic Ignorance
For those of you who might not be familiar with Jaywalking, the premise is simple: Jay Leno interviews random people on the street, asking them simple questions like "can you name three American presidents?" Invariably, he finds clueless people who, rather than admitting that they can't name three American presidents, announce with total sincerity "Martin Sheen, Ben Franklin and Winston Churchill."

What horrified me about Jaywalking was not that the people seemed ignorant, but that they didn't even have enough sense to be ashamed or embarrassed by that fact.

A Need To Know Basis
I've lightened up since then, beginning with asking a very important question: "So what?"

So what if you don't know who any of America's presidents were? So what if you don't know what countries border America? So what if you can't point to America on the globe?

Frankly, in the scope of all those things that truly matter, those things don't matter.

In life, there are things you need to know, and there are things you don't need to know. I was no longer annoyed by what I once saw as unapologetic ignorance, because what shame is there in not knowing something you don't need to know?

The Circle Of Influence
What, then, qualifies as something you need to know? The answer is simple. By focusing on those things that are within your circle of influence, you discover those things that you absolutely, positively must know (and must know well)! Anything else falls into the category of good to know, nice to know, and may-never-need-too-know.

I was introduced to the circle of influence by Stephen Covey's book, "The 7 Habits Of Highly Effective People." The idea is that there are things you can influence and there are things that you either can't influence or have very little power to influence. As much as we may want world peace, most of us have very little power to influence that. Peace within our own homes, however, is very much within our circle of influence.

In the same sense, knowing a lot about something you will never experience or use has very little practical value. There is nothing wrong with knowing a little or even a lot about things outside of your circle of influence, but if it comes at the cost of knowledge about things you should be focusing much more attention to, then it becomes a problem.

Truly Shameless Ignorance
As you can see now, my frustration with the ignorance of people featured on Jaywalking was misplaced.

Truly shameless ignorance is to be ignorant of those things that do matter. The things within your circle of influence certainly matter the most, for they belong to that part of your world that suffers the most noticeably as a direct result of your action or inaction.

If I were to conduct an experiment Jaywalking-style, it might go something like this:

(I pull aside some random guy on the street)
Babblermouth: Excuse me, can I ask you a few questions? It'll be painless, just a little social experiment...
Guy: (Glances at his watch) Sure, but I only have about five minutes.
Babblermouth: Great, I'll keep it fast. The first question is, do you have any children?
Guy: Yes, a boy and a girl.
Babblermouth: Ok, thanks. Are they in school?
Guy: Yes, our oldest is in 3rd grade, and youngest just started kindergarten this year.
Babblermouth: And what are their favorite subjects in school?
Guy: (Winces, then chuckles uncomfortably) I, uh...I guess I don't know.
Babblermouth: That's ok. Are you married?
Guy: I sure am, for fifteen years now.
Babblermouth: Congratulations. Where does your wife want to go for your next vacation?
Guy: Oh, man. (Tries hard to think before finally shrugging his shoulders) I don't know.
Babblermouth: No problem, one last question. What are the major goals you're trying to accomplish in the next 5 years?
Guy: (After a long, uncomfortable silence) I'm sorry, I really need to get going or I'll be late for work.
Babblermouth: Well, thanks for your time...somehow, this wasn't as funny as when Jay does it!

I don't know about you, but I find something terribly sad about this kind of ignorance.

Are you shamelessly ignorant when it comes to your circle of influence? Have you neglected it for too long, or taken it for granted? If so, take a moment right now to increase your knowledge where it really matters. Talk to the ones you love, and be amazed at how much there is to learn about them. It will be the best thing you've ever done for yourself -- and for the people in your circle.

Also At Babblermouth:
Fun With Truisms
7 Habits Of Highly Effective People...In Haiku
Financial Freedom Series 1-Cause and Effect