Recapping 2012 Part 7 of 7

 
2012 TimelineWell here it is, the end, the last day of 2012, and this is my last post looking back at the year. My next post will be looking forward. It’s important to know and understand the past but that’s only so you can plan your future. Going into 2013 I thought this post would be a good reminder that every decision you make has consequences so the sooner you make good decisions the better off you’ll be. Looking ahead means projecting several outcomes from each decision and deciding which is the most likely and which will serve you best. Here’s to taking the right combination of paths in 2013!

Action and Reaction

Early in our school lives we all learn about Issac Newton and his apple mishap that led to his theory of gravity. Well Newton also had some laws of motion and his third law of motion loosely states that for every action there is an equal and opposite reaction. Welcome to world of consequences. For every choice you make there is a choice (or several) that you did not make and every decision leads to a result, good or bad.

Consequences start at a young age. Things you have control over but often don’t have the maturity to appreciate, like the importance of good grades, for example. Once we move on to the next level in life we choose our major in college or career in life, and we would do well to choose wisely. How many people are willing to go into debt for an education that may not provide the means to easily pay back that debt? That one decision will have ripple effects throughout life.

How many people delay investing in their retirement accounts early in their working lives because they think they can’t afford it, because it will negatively affect their lifestyle? The fact is that their lifestyle will be much more adversely affected in old age if they wait too long. It’s not that they can’t afford it now, it’s that they won’t be able to afford it later.

Taking a What Next approach to decision making is to weigh as many options as feasible, and to choose carefully. Asking What Next means you have a long term outlook and understand the ramifications decisions have. In financial planning terms that means understanding the future value of a decision. Put simply, the future value of a dollar invested today at 10% interest is $1.10 one year later. The future value of not going into debt to fund your education is the ability to start saving earlier and building your retirement nest egg sooner.

I don’t have children but I think I might have spent more time talking about the consequences of that decision with Julie, than most people who do have children. I’m not sure I can think of a weightier decision than the choice to have children and yet I wonder how many people treat it with the reverence it deserves.

The everyday choices we face today will affect the life we have later. Buying a house, a car, toys, taking lavish vacations, all diminish your ability to save for the future. Whether you stay in your home for a long time or move frequently, whether you buy a new car every couple of years or hang onto it for a decade, will determine your level of success. It is a balance between now and then.

The question for you is, are you well balanced? (I know what some people say about me – so let the jokes begin) Do you have a long term outlook on life? Are you confident that your choices today will still look correct a year or five years from now?

Share some examples of long term decisions that have paid off for you and some that didn’t.


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Lead, Follow AND Get Out of the Way

 
What does it mean to be a leader? Does it mean you have all the answers? Does it mean that you give the orders and others do the work? Does it mean that you answer to no one? While there might be some (very little) truth in those statements, a leader must be versatile, adapt to each situation, and handle the circumstances differently when needed.

When things need to get done it is often said that you need to lead, follow or get out of the way. That sounds good but what a real leader does is all of those things – they lead, yes they follow, and they know when to get out of the way.

LeadDucks

Sometimes your entire team will look to you for the answer, the one decision that only you can make. At those times you, as the leader, must take responsibility, steel yourself, and make the difficult decision. This is the reason you’ve worked hard, honed your skills, listened to your team, weighed the options, and are ready to decide. This is what most people think of when they think of a leader but it is only one aspect of what a real leader does.

Follow

As the leader you are ultimately responsible but you’ve also assembled a team of experts and there’s a reason you picked them. Not only should you give them room but you also need to follow their lead, listen to and learn from their interactions, their brainstorming, their good ideas. A leader who is willing to be led by their team is respecting their talents and their contributions. That respect will boost morale, show your confidence in the team and make for a better working environment. A true leader is able to put their own interests aside for the benefit of the project and the team. The leader is now just a member of the team, elevating one or more people to the role they usually hold.

Get Out of the Way

This one is hard. It may be difficult to see how it differs from following. This is a time when the leader, recognizing that their mere presence is a hindrance, must step away and put trust in their team that the work will be done. This is a real test of how you perceive your own leadership. If you have confidence in yourself you will also have confidence in your team.

Leaders don’t have all the answers, aren’t dictators, recognize when they are a help and when they are not. Are you a leader? Am I on to something here? What can you add to this post? Leave your comments and suggestions below. I look forward to your perspective.


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Action and Reaction

 

Early in our school lives we all learn about Issac Newton and his apple mishap that led to his theory of gravity. Well Newton also had some laws of motion and his third law of motion loosely states that for every action there is an equal and opposite reaction. Welcome to world of consequences. For every choice you make there is a choice (or several) that you did not make and every decision leads to a result, good or bad.

Consequences start at a young age. Things you have control over but often don’t have the maturity to appreciate, like the importance of good grades, for example. Once we move on to the next level in life we choose our major in college or career in life, and we would do well to choose wisely. How many people are willing to go into debt for an education that may not provide the means to easily pay back that debt? That one decision will have ripple effects throughout life.

How many people delay investing in their retirement accounts early in their working lives because they think they can’t afford it, because it will negatively affect their lifestyle? The fact is that their lifestyle will be much more adversely affected in old age if they wait too long. It’s not that they can’t afford it now, it’s that they won’t be able to afford it later.

Taking a What Next approach to decision making is to weigh as many options as feasible, and to choose carefully. Asking What Next means you have a long term outlook and understand the ramifications decisions have. In financial planning terms that means understanding the future value of a decision. Put simply, the future value of a dollar invested today at 10% interest is $1.10 one year later. The future value of not going into debt to fund your education is the ability to start saving earlier and building your retirement nest egg sooner.

I don’t have children but I think I might have spent more time talking about the consequences of that decision with Julie, than most people who do have children. I’m not sure I can think of a weightier decision than the choice to have children and yet I wonder how many people treat it with the reverence it deserves.

The everyday choices we face today will affect the life we have later. Buying a house, a car, toys, taking lavish vacations, all diminish your ability to save for the future. Whether you stay in your home for a long time or move frequently, whether you buy a new car every couple of years or hang onto it for a decade, will determine your level of success. It is a balance between now and then.

The question for you is, are you well balanced? (I know what some people say about me – so let the jokes begin) Do you have a long term outlook on life? Are you confident that your choices today will still look correct a year or five years from now?

Share some examples of long term decisions that have paid off for you and some that didn’t.


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Functional Financial Illiteracy

 

New York Stock ExchangeAsk anyone and they will tell you that it is very important to understand your finances, to be smart about your investments. Those same people, however, often are not knowledgeable about finance and investment, if surveys and polls are to be believed. One study published in December 2006 states: “Our review reveals that many households are unfamiliar with even the most basic economic concepts needed to make saving and investment decisions.” (emphasis added)

You simply can’t ask What Next without some level of financial literacy.

The media  seems to work hard to educate and inform us. Money Magazine, Smart Money Magazine, Marketwatch.com, and CNBC are read or watched by millions but can they be trusted? When the headlines on the covers of the magazines are things like “Top Mutual Funds for This Year” or “What the Market Will do Next,” they cannot be trusted because no one can predict these things accurately. When CNBC holds a “Million Dollar Portfolio Challenge” and rings the closing bell of the stock market to promote their casinoization of investing they lose any credibility they had.Roulette

The language of investing perpetuates the gambling myth. A stock that does well is called a “winner,” an investment recommendation is called a “hot tip” as if it were a horse running in the third race at the track. No wonder planning for the future is called the “retirement game.” The stock market, investing in general, is not a game where, if the “player” gets lucky, he can beat the house.

Asking What Next takes a much different approach to investing. It’s systematic, researched, and individual. Investing with a What Next outlook means weighing options, understanding that an investment in one area often precludes an investment in another area, recognizes that it’s folly to attempt to do better than “the market” when the market is made up of people all trying to do the same thing. For me, educating myself meant pursuing a career change into financial planning. That was a bit extreme. For most people, seeking the advice of a financial planner would suffice.

Asking What Next is only the first step. Understanding What Next requires work.

ConfusedMany people making financial decisions are functional yet financially illiterate. It’s time to change that. I’d stop treating investing like a game by avoiding the “Million Dollar Portfolio Challenge” and start educating myself on a reasoned, systematic approach to the future.

In my opinion your best resources to educate yourself and take a What Next approach to your finances, investments, and retirement planning are the following. Watch an episode of Til Debt Do Us Part on CNBC then check out Gail Vaz-Oxlade’s website. I’m a big fan of The Coffeehouse Investor both the book and the website – check them out. Of course there’s always my book What Next A Proactive Approach to Success – I’m kind of partial to that one (also available as an eBook).

A big part of What Next is taking action. Will you check out any of the above suggestions?


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