Posted by Canadian Dream on July 14, 2010
My workplace recently changed its performance management and compensation practices to a new system. Basically in the new system there are four ranks you can get related to how well you meet your goals. If you get the top rank you can get an extra one or two percent raise compared with the rank below it. What struck me about the system when discussing it with a friend is that it doesn’t provide much motivation to go the extra mile. A 1 or 2% raise likely isn’t enough compensation for the amount of work you would need to do to achieve that top rank.
For example, if you earned $80,000 a year and did an extra half an hour of work a day over a year(~ 122.5 hours) to get that top rank. A one percent raise would be an extra $800, while two percent would be $1600. That works out to $6.53 to $13.06/hour of extra work. Granted that doesn’t take into consideration any improvement in pension benefits, but even if you assume a very generous 20% bonus that still works out to $7.83 to $15.67/hour well below $40/hour the person is making on their base salary.
So overall there isn’t much motivation to go the extra mile at my day job. What this did inspire me to think about was where then would you put your extra mile to get the most bang for the time put in? This then lead me to wonder a bit more about my long term goal to do more writing when I pull leave my day job around my 45th birthday. Why should I wait to work on building that business up? Doing it now would likely pay better than the extra effort at my day job and now that I’m working 80% time I have the time to consider doing something like that.
Perhaps the solution to leaving your day job isn’t just having enough investment income that you don’t need to work, but rather having enough income from other sources that you don’t need the day job. If you like working on something else that provides a stable income why shouldn’t you consider it as part of your plan going forward? Granted in my case, income from freelance writing and/or self publishing isn’t all that regular but if you build up a business to the point where you are getting fairly regular income over the course of two years you might be able to count on a portion of it.
That way over the long haul you are basically working yourself towards a full blown semi-retired situation where yes you are working, but on something you love. The rest of your income then would come from investments. Of course there are risks to a plan like this, but frankly so is expecting you to keep your current job for income. Overall I feel having income from investments and self employment could very well be less risky than full employment with a company over the long run.
So would you try to work yourself into a semi-retired scenario or are you too attached to the idea of full blown early retirement? Myself, I’m not really sure, but I’m now thinking about it.
Posted by Dave on July 13, 2010
With Tim in the middle of his $25 food challenge, I thought I would weigh in with how I am currently eating. I had previously written about my $50 grocery bill back in February, but much as changed since that time in my household budget. I became really interested in what was actually healthy to eat and started reading books (as I normally do). The first book I read was “Good Calories, Bad Calories” by Gary Taubes. The “story” (it is a non-fiction book) told was a real eye-opener to me – it essentially puts into question the vast majority of what could be described as conventional wisdom and the human diet. Essentially, the author of the book goes through dietary studies from the 1950′s and on and explains how, for example the fat-cholesterol hypothesis (eating fat and cholesterol makes you fat and increases your rate of heart disease) was formed as well as how the science used in the studies to reach what is now conventional wisdom, was incorrect.
Secondly, I read “The Primal Blueprint” which basically states that humans are not meant to eat grains of any kind, rather a diet of meat, vegetables and fruits is what we as a species ate as we evolved the consumption of grains, rice, legumes and other carbohydrates is making humans fat and unhealthy. An excellent summary of the argument can be seen here as a trailer to a similarly argued movie an excerpt is as follows:
“If you could pack all of human history into one year, we’ve only been farming and eating grain since about yesterday which is when we became shorter and fatter. We only started consuming processed vegetable oils about 10 minutes ago, which is when heart disease became our number one killer. So, after examining all this human history, the experts came to the obvious conclusion….we need to eat a lot more of these – and so they convinced us that human health depended on foods that we hadn’t eaten for more than 99% of our existence”
As a result of reading these two books, my diet changed significantly. I ate only meat, fruits and vegetables for a 4-week period. Over that same period I was monitored by my naturopath, having what is essentially a cellular health reading done at the beginning and end of period to see what my change in diet had done. Over the 4-week period, I lost approximately 10 lbs. Some of this weight was water, but approximately 11 lbs was fat. I gained 3 lbs of muscle, which was interesting as I had curtailed weightlifting from 2-3 times per week to once over the period (I ran a 10 km race in the middle with no training and didn’t want my legs to be sore for the run). Additionally, my internal cellular health had improved significantly over the 4-week period. Carrying the diet through to today, I have lost approximately 20 lbs and have noticed no loss in strength lifting weight (I’m actually lifting more mass than ever). My wife had very similar results, and there are many people on message boards all over the internet who have found that this diet has reversed their diabetes, significantly reduced cholesterol and blood pressure as well as other positive side effects.
So, what do I eat? Most mornings for breakfast, I eat 3-4 scrambled eggs with a vegetable smoothie. For lunch, I eat some kind of meat (usually from the previous night’s dinner) and some raw vegetables, and for dinner, I’ll usually have meat with a salad or cooked vegetable.
What is the impact on my $50 per week budget? From tracking it over the past few weeks, it has gone up approximately 50% (from $50 to around $75 per week). This number should get lowered significantly over the next couple of months, as I ordered and should receive approximately 300 lbs of meat from the half a cow from a local farm, which will reduce the cost per pound of meat significantly.
The total impact on our household food budget is basically $0 however, as we don’t eat out at all anymore, as most restaurants that we would normally go to don’t offer the food at a cheap enough price to make it worth eating there (2 steaks at a restaurant is very expensive).
Although gimicky, the diet itself makes sense – why eat food that we aren’t meant to eat? Why not eat like the cavemen? Just because we can eat grain, doesn’t mean we should – it doesn’t really seem to be helping the health of North Americans over the past century.
Although secondary to eating “properly”, “The Primary Blueprint” also advises to workout like a caveman, as in short bursts. Rather than running on a treadmill as hard as you can go for an hour (as I used to do) – going on a brisk walk for an hour or so a few times a week is a better way to lose fat. To increase cardiovascular capacity, sprint like our ancestors did after their food once or twice a week. Lift heavy weights once or twice a week to build and maintain muscle and you should be in pretty good shape – it’s worked for me.
Have you heard of this way of eating? Would you try it? Would you spend more money on food to gain better health?
*Another good video can be found here describing the primal/paleo way of eating
Posted by Robert on July 12, 2010
Something strange I’ve noticed while working with people, is that most people want others to make the hard choices for them. I work with grown ups. The main advantage to being a grown up is making your own decisions. Still, I too often hear phrases like: “I had no choice;” “What could I do?”; “I was forced;” or “What do you think I should do?” These are all a form of abdication of the individual’s opportunity to decide.
It seems silly to grow up wanting more freedom and, when we have grown up, to restrict the choices we allow ourselves to make. I think it’s a large part of the explanation for the market for professional advice (and charlatans). Most people who work with a financial advisor could probably write their own financial plan, develop their own investment strategy and follow through, all without outside help. I’ll be the first to admit that it doesn’t require exceptional brainpower (Willpower is another matter). I know that at least three of my best clients also invest a certain amount of their money on their own. Why do people who are able and willing to invest on their own hire a financial advisor?
I have found two reasons why people have such an aversion to making difficult decisions. The first is uncertainty. When the outcome is uncertain, it is not possible to know beforehand which choice will be “correct.” (To clarify, when I say uncertain, I mean that the probability is not knowable. When rolling a dice, there is a 1 in 6 chance of rolling a given number, the probability is known and decisions about dice are mathematical. Weather is unpredictable. Planning an event a month ahead cannot depend on the weather. This is what I mean by uncertain.) This is where people tend to look to others. We hope that an expert has a clearer view, and a better probability of being right. If we can rely on an insightful forecaster, maybe we can improve our chances of success. Especially when the outcome is important (eg. financial success versus failure), there is real pressure to be right. However, uncertainty cannot be avoided when we look to the future, and there is a very real chance of being wrong. Worse, studies have shown that financial forecasters have a poor track record, most being correct around 50% of the time; a coin toss is as likely to suggest the correct decision.
If we must suffer a negative outcome, it seems to be psychologically easier to have someone else to blame, which is the second reason people avoid making difficult decisions. We don’t want any of the blame to stick to us. If a person hires an advisor, and an undesirable circumstance arises, the individual can blame the advisor, end the relationship and start over. This way, the individual is able to maintain an illusion of control over their financial outcomes. I see spouses do this with petty decisions and blame, such as whether or not to carry an umbrella. I wouldn’t be surprised to learn that accumulating blame is the cause of most divorces.
Although grown ups are able to decide, making decisions under uncertainty is difficult. I have found a way to make these decisions and to feel good about the result. The first step is to outline the possible choices. The second step is to note the possible outcomes if we are right or if we are wrong. If it is a decisions with only two possibilities, there are four possible outcomes. The choice is made in a way that may seem backward, by deciding which of the four outcomes would be the most mentally painful and choosing to avoid that possibility. Notice that, because we are operating under uncertainty, probability must not enter into the decision. In this way, risk is properly accounted for and minimized. (Only if the successful outcome far outweighs either negative outcome would the decision be made based on the expectation of success.)
Here is an example. A couple met with me when the husband was offered the chance to join the pension plan at work. Normally, I would recommend maintaining control over your own investment choices and aiming for higher possible returns. However, this couple kept asking questions like: “What if the market does poorly?” “How bad could the investment returns be?” and “Aren’t the guarantees in the pension valuable?” I pointed out that they have two choices: join the pension plan, or make their own investment choices. They also had two potential results in each case: better returns or worse returns in comparison with the other option. Obviously, they would feel good if they chose the pension and it performed better, or if they chose their own investments and performed better. But which would be worse: choosing the pension and watching the market produce great returns, or investing in the market and experiencing poor returns compared to the pension? The pension will always produce some return, whereas a market investment could lose money and that would cause real regret. The couple expected they would feel less regret from missed growth, and chose to join the pension. (So far, they’ve been right.)
People seem to prefer not to make difficult decisions for themselves. Because of confusion and the potential for guilt, they prefer to hire an advisor. The advisor helps by making the hard decisions and, if the individual becomes unhappy, there is someone to blame and punish. This removes the mental anguish that accompanies decision-making under uncertainty. However, accounting for uncertainty and being clear about the reasoning that supports your decision allows you to make the decision yourself without confusion or guilt. What hard decisions have you had to make? How did you choose? What do you do when choices turn out “wrong”?
