Recent Interview: 5000 Years of Money Experience

In my ongoing interviews (100 people over 50 years of age), I spoke to a lady in L.A. and a man in Atlanta.

L.A. Lady: "Understand Your Investments"

She looked to be about 70 years (I never ask women their age), and she was distraught about her retirement. She normally goes to Mammoth Mountain every year to enjoy the wilderness, but she couldn't go this year. Due to the fall in the stock market, things were too tight.

I asked what she would advise the younger generation about the money and she responded, "Don't fall in love with your investments. I should have sold my stocks earlier this year, but my financial adviser kept telling me to 'stay on course.' As a result, I lost 2/3 of the value of my stock funds. When my son studied my situation, he told me I should sell my stocks to avoid losing more. After all, I could live several years on that money. So I sold."

She was so distraught at her huge loss that she didn't want to think about it. So I refrained from asking her any more questions. But here are my thoughts:

#1 - Since she was so close to retirement, why did she have such a large proportion of her retirement in stocks, seeing that she thought she would need the money soon? My mother's investments (she's well over 70) weren't really affected by the current crash, since she's not invested heavily in stocks.

#2 - She did what "the herd" always seems to do: sell low. When the stock market's this low, Warren Buffett's on a buying frenzy. In general, I don't want to be selling when Buffett's buying.

#3 - People simply must understand their investments. I feel really badly for her. People need to understand that stock funds can go down 2/3 and not bounce back for some time. If you don't want that kind of volatility, don't be in stocks.

Atlanta Man: Just Walk In and Ask People for Jobs

He's 72 years old and driving the shuttle from the Atlanta Airport. His advice to the younger generations:

#1 - Working is better than not working, even if it's at a low-paying job. You can't get ahead while you're not working. Sometimes he worked more than one job, just to see which one turned out better before dumping the worse job.

#2 - If you need a job, just walk up to people and ask them for a job, whether they say they're hiring or not. Employers seem to respect that kind of initiative. If they don't have a job, ask if they know anyone else who's hiring. (This advice jives with studies of those looking for jobs. Advertised job openings are flooded with applicants, making your odds on getting the job slim. Instead, decide what kind of job you want and approach those companies for a job, whether they are hiring or not. Maybe they just lost someone and you're the answer to their prayers. The last thing many companies want to do is to take time off from profitable work to start interviewing scores of people.)

Personal and Business Advice in Turbulent Times

Last night I attended a Town Hall Meeting at Kennesaw State University. I heard some great advice I felt I should pass on.

The Economic Summit Town Hall Meeting, held Tuesday evening at the KSU Center, allowed individuals and business owners to voice their economic concerns and get responses from experts. Sponsored by the Kennesaw State division of the Small Business Development Center and KSU’s Econometric Center, the panelists included Joseph Brannen, President of the Georgia Bankers Association; Tony Britton, Senior Vice President of Wachovia; Dr. Gene Henssler, President of G.W. Henssler & Associates and host of the popular radio program, Money Talks; and Dr. Donald Sabbarese, Director of KSU’s Econometric Center.

After opening remarks by Dr. Lendley Black, Provost & Vice President for Academic Affairs, Lydia C. Jones of the SBDC introduced the discussion format and established an informal, accessible atmosphere to discuss potentially volatile and emotional issues. “Please, no political comments!” Jones warned.

Although we hear abundant reports and advice on the economy, the unique value of this meeting was the opportunity to ask specific questions and to get answers that applied specifically to our region.

The bad news is that building and manufacturing are suffering. One in six homeowners are “under water,” owing more than their homes could sell for. Although exports have been the good news in recent years, now other countries are hurting, which will of course negatively impact overseas sales. But then, we’ve heard all the bad news over and over.

What about the good news?

• Ninety six percent of our banks are well-funded. Two thirds are profitable.

• The government has acted to restore confidence in the markets. The FDIC now guarantees our bank holdings for up to $250,000. (The time when the government failed to act was 1929, allowing the Great Depression to take hold.)

• Five hundred people per day are moving to Georgia.

• Atlanta is well-diversified, has no geographical boundaries, has a world-class airport and is business-friendly. No wonder it’s growing at two times the rate of the country. Atlanta real estate hasn’t “burst.” It’s only down 6.9%, one of the lowest declines in the country. (Compare this to Miami, where house values are off 44%.

Specific answers to people’s concerns:

1. Should I get out of stocks? “This is the dumbest time ever to get out of the stock market,” advised Hennsler. When stocks are cheap, this is the ideal time to buy, not sell.
   
   
2. What about unemployment? Sure, unemployment is creeping up. But in recent years it’s been at an unprecedented 5%. Manufacturing is hurting, so move into growth areas like education and health.
   
   
3. Are banks doomed to failure? No. They’re simply changing  getting back to basics  like coaches concentrating on blocking and tackling. We had gotten away from that. People with good jobs and good credit can still get loans for houses and businesses. People with bad credit and shaky jobs and no collateral won’t be able to get loans. That’s the way it’s supposed to be. We had gotten away from that. Build relationships with bankers. Give them a detailed business plan. So much of business is about relationships. Pursue them.
   
   
4. How can the government give away all that money? Won’t we have to pay for it? Henssler believes that the government could actually make money on these bailouts. Companies will have to pay on the loans and the government will own assets that they’ll be able to sell, hopefully at a profit, in more stable times.
   

In the end, Lydia Jones asked the panelists to each share pitfalls we should avoid. They responded:

1. Don’t get rid of your key people.
2. Be informed, but don’t take drastic measures.
3. Keep your optimism.
4. Don’t overreact. Keep the lines of communication open.
5. Don’t cut back on marketing. Sell, sell, sell!

Wise Investing Advice for Turbulent Times

These are scary times. I heard last Friday that my bank had shut its doors. Fortunately, another company had bought them out, so that I can still write checks, visit the ATM and receive automatic deposits from my companies. What if they'd not been bought out? How could I access my funds?

These are just a few of the questions people are asking these days. David Hultstrom is a financial adviser I respect. He gave me permission to reprint his recent newsletter below.

Subject: Financial Foundations October 2008 Newsletter, by David Hultstrom.

There seem to be a lot of questions out there about what is going on currently, so this month's newsletter will touch on a number of items and provide links to useful resources.

1) If you need a counterbalance to all the blaring headlines and breathless reporting about the current state of the financial markets, I highly recommend listening to the presentation at http://www.dfaus.com/library/videos/different/.

2) As you undoubtedly know, bank deposits are covered by FDIC insurance. If you would like specific information about how the coverage works, see http://www.fdic.gov/deposit/deposits/insuringdeposits/index.html.

3) Investment accounts are covered by SIPC insurance and information about that and other issues related to the failure of investment firms can be found at http://www.finra.org/Investors/ProtectYourself/InvestorAlerts/P116996.

4) There are a number of services that rate the safety of banks (see http://www.fdic.gov/bank/individual/bank/index.html), unfortunately most of them cost more than it is worth for a consumer who simply wants to know how their bank is doing. However, Bankrate.com does have a free search to see how your bank is rated at http://www.bankrate.com/brm/safesound/ss_home.asp.

5) The New York Times had a good interactive graphic that gave a sense of the size of the problems, see http://www.nytimes.com/interactive/2008/09/15/business/20080916-treemap-graphic.html and move your mouse over the listings. Note the data is a few weeks old now, which seems like an eternity in these fast-moving times. Also, this graphic gives a sense of the size of the Lehman bankruptcy http://www.investmentpostcards.com/2008/09/24/picture-du-jour-10-largest-us-bankruptcies/print/.

6) Based on monthly data since World War II, there have been 6 severe stock market downturns (declines over 20% in nominal terms). In these, the average decline has been about 1/3, and they have lasted an average of slightly over 3 years (in other words, the time from a peak through a 20% or more decline then on to a new high). In the worst of these (1973-74 and 2000-02), the market declines have been on the order of 45% and lasted 4-6 years until portfolios were back to their previous values. Currently, the U.S. stock market is down approximately 20% from its high almost a year ago. There is no way to know if it will go higher or lower from here. This is subtle but important. If there was a consensus that the market was going down further it would already be down to reflect that consensus. Conversely, if there was a consensus view that the market was headed higher, it would already be higher to reflect that expectation. There are only two ways to "win": 1) be smarter than the collective wisdom of everyone participating in the market, or 2) ignore short term fluctuations and remain with your target investment portfolio knowing that in the long run, you will be better off than the vast majority of folks who tried to time the market getting in and out. In this, as with many things, slow and steady wins the race. Occasionally, the market seems to get irrational and I think you may be able to profit from being less subject to the current hysteria (either positive or negative), this does not appear to me to be one of those times. I think the possible outcomes are much more uncertain than normal from this point and there is a significant chance of further deterioration and also a significant chance that the market could recover from this point. I don't know, and I know that I don't know (which might possibly make me smarter than the TV talking heads though less entertaining - I leave that for you to decide). Uncertainty and risk is why none of our clients have a 100% stock portfolio and none of our clients have 100% of the stocks they do own located solely in the U.S.

My tentative plan is to write next month about lessons that can be learned from both the technology bubble in the late 90's and the lending bubble we are still recovering from. Until then, if you need anything - even just to talk about what is going on - please feel free to contact us.

Note: Our clients are located around the country (and world), if you know someone we may be able to help, we would be happy to do so. While Financial Foundations is intended primarily for our clients, we are happy to expand our readership so feel free to pass this along. If you have received this from someone else in that manner and would prefer to get it directly from us each month, please let us know. Similarly, if for some reason you no longer wish to receive this (as unimaginable as that seems) simply let us know that as well.

Regards,

David E. Hultstrom
MBA, CFP, CFA, ChFC
Financial Architects, LLC
Financial Planning & Wealth Management
Address: 107 Weatherstone Drive, Suite 510
Woodstock, GA 30188
Phone: 770-517-8160
Fax: 770-517-8159
Toll Free: 888-Fin-Arch (888-346-2724)
E-mail: David@FinancialArchitectsLLC.com
Web Site: www.FinancialArchitectsLLC.com

Disclaimer: The information contained herein or as an attachment is intended solely for the individual or entity to whom it is addressed and may contain confidential and/or privileged material. All information is believed to be correct but accuracy cannot be guaranteed. Opinions expressed are subject to change without notice. All investments are subject to financial risk and there can be no guarantees that performance results will meet or exceed expectations. Any review, retransmission, dissemination, or acting in reliance on this information by persons or entities other than the intended recipient is prohibited. If you have received this transmittal in error, we apologize for the inconvenience. Please contact the sender and immediately delete and/or shred all copies. Thank you.

Frugal, Frugal, Frugal

I stole this title from the title of one of Stanley and Danko's chapters in The Millionaire Next Door, reflecting the findings of their surveys of people who had accumulated over $1,000,000. It's counter intuitive to think of the wealthy as frugal, I know, since we've all seen "The Lifestyles of the Rich and Famous" and assume that all wealthy people continually indulge themselves with yachts and extravagant vacations.

But it makes sense when you think about it: to accumulate wealth, you've got to live beneath your means; to accumulate extraordinary wealth, you've got to live wayyyy beneath your means. What distinguished these people was not so much how much they made, since they were spread out among many ordinary vocations. They were distinguished, in part, by spending much less than they made - living in neighborhoods with those who made far less, buying conservative, reliable cars. They accumulated wealth by refusing to throw it away.

This is the way my parents lived, thus instilling in me a different mentality than most of the culture I sense around me. Mom's favorite place to shop for clothes is, to this day, her favorite thrift store. Her favorite car is the one she's owned for ten years. She has plenty of money saved for retirement, believe me. Yet, she detests spending money needlessly and relishes a great bargain.

In the spirit of mom and the millionaires surveyed by Stanley and Danko, I've kept my eye out for ski equipment over the months. I take some of my kids skiing once each Winter, but I detest paying such exhorbitant fees for equipment rental. If we could purchase our own equipment cheaply and avoid the rental, we'd only have to purchase a lift ticket. Enter the local Good Will store and Play It Again Sports (selling used sporting goods).

If I bought brand new ski equipment, it would be new only until I used it once. For the rest of my life, it would be used. If you can buy quality used equipment, why not skip that first "brand new" day and start off used?

(By the way, my wife's in full agreement about my frugality. We had a Saturday morning date to Goodwill and she was delighted. She picked up a small table we needed for the laundry room. Reference Stanley and Danko's findings on marrying a frugal mate!)

So I got a nice pair of skis, Saloman ski boots in my size, poles and nice carrying bag, all for under $30.00.

Looking at sporting goods sites, it appears that new skis cost anywhere from $125 to $700. Saloman Ski boots from $125 to $450, poles from $20 to $50, carrying bags starting at $50.

So it appears that, even if you took the cheapest prices, I've saved over $300 in ski equipment by shopping used in the off-season. I'm also in the process of helping my 14-year-old twins purchase snow boards. If they save a similar amount, we're talking $900 in savings as a family, which, if invested in a stock market index fund that might return the historic average (10%), would give me over $100,000 in 50 years!

It's just one item. But the impact can be huge. Doesn't it make Stanley and Danko's findings make sense? These first-generation millionaires understood the power of frugle and applied it to their cars, homes, clothes, vacations, etc. So don't be embarrassed to frequent thrift stores, shop off-season and peruse Craig's List. When you do, you're thinking like a millionaire!

Common Problems with Sudden Wealth

David Hultstrom is a financial planner and wealth manager for whom I have a lot of respect. His most recent newsletter was very insightful and I thought others would be interested. His contact information is at the end if you'd like to subscribe.

Financial Foundations August 2008 Newsletter

This month I would like to talk about the psychology of "sudden wealth". While probably all of us have had pleasant daydreams about the possibility of suddenly coming into a large amount of money, in fact it can cause a great deal of stress. The source of sudden wealth doesn't necessarily have to be winning a lottery or receiving an unexpected inheritance. Many people face adjustment issues even from the sale of a business, or the rollover of a large 401(k) upon retirement. In those cases, even though net worth is unchanged, having the wealth more accessible and liquid somehow makes it seem more real. Following, in no particular order, are some comments that I think might be instructive:

1) People who are prudent with small amounts of money tend to be prudent with large amounts of money. People who are profligate before an unexpected inflow will be profligate with that inflow. Or, in other words, more income or wealth won't solve what is fundamentally a spending problem. This is undoubtedly the reason that studies have found between a third and half of lottery winners end up declaring bankruptcy.

2) Far too often people who come into sudden wealth seem to almost be trying to lose the money - and subconsciously, they might be. Most people become comfortable with a certain lifestyle, self-image, etc. When something happens to change that, they may try (perhaps subconsciously) to get back to where they were previously. This is the financial equivalent of the biological process of homeostasis.

3) People think that lump sums will go further than they actually will. Someone who has made $50,000 per year all their lives may see the $500,000 in their 401(k) at retirement as an incredible amount of money, when it really isn't. The most extreme example of this that I have seen is a very successful attorney who was approaching retirement. His main assets were about $1,000,000 in his 401(k) and the value of his partnership share which his partners would buy from him for about $500,000. I asked the couple how much they needed to live on in retirement and his wife replied, "We have a fairly modest lifestyle, if we continue to get what he makes now, we should be just fine." I asked the obvious follow up question, "What do you make now?" To which he responded: "About $500,000." I wanted to ask what they planned to live on in year four (but I didn't). I also didn't get them as clients. My guess is they went with an advisor who said they were in fine shape.

4) People sometimes try to "prove something" to someone such as a spouse or a parent (even if the parent is deceased). It is not uncommon for someone to lose a great deal of sudden wealth in investments or businesses trying to demonstrate how skilled they are at investing or business.

5) Sometimes people don't know what to do so they ignore the funds completely. I once did a financial plan for a schoolteacher who lived very frugally on her salary. Her primary concern was whether she could afford to buy a condo to live in rather than continuing to rent an apartment. Her father had left her some stocks when he died more than 20 years previously, and she not only didn't spend any of the money, she had never bought or sold anything in the account. It was untouched for more than 20 years and her net worth was just under $1,000,000.

6) The receipt of sudden wealth can also cause strains with existing friends and family members. Many wealthy people are treated differently and not uncommonly feel taken advantage of. Of course, new "friends" and "advisors" become prevalent as well.

So, what is the solution? The main thing is to proceed slowly. It is OK to leave the wealth in cash while becoming acclimated to the new situation. It may not be prudent to immediately move to a nicer area, a bigger house, etc. As a first step, paying off all debt, and committing to remain debt-free is probably prudent. In addition, thinking of the wealth as an income stream, rather than a lump sum may be helpful. As I covered in the July 2007 Financial Foundations, the sustainable withdrawal rate from a portfolio is about 4% per year. Thinking of a million dollar windfall as being able to pay off a $500,000 mortgage and then have $20,000 per year from the remaining portfolio to spend, may lead to vastly different decisions than thinking about what to do with a million dollars.

Note: Our clients are located around the country (and world), if you know someone we may be able to help, we would be happy to do so. While Financial Foundations is intended primarily for our clients, we are happy to expand our readership so feel free to pass this along. If you have received this from someone else in that manner and would prefer to get it directly from us each month, please let us know. Similarly, if for some reason you no longer wish to receive this (as unimaginable as that seems) simply let us know that as well.

Regards,
David E. Hultstrom
MBA, CFP, CFA, ChFC
Financial Architects, LLC
Financial Planning & Wealth Management
Address: 107 Weatherstone Drive, Suite 510
Woodstock, GA 30188
Phone: 770-517-8160
Fax: 770-517-8159
Toll Free: 888-Fin-Arch (888-346-2724)
E-mail: David@FinancialArchitectsLLC.com
Web Site: www.FinancialArchitectsLLC.com

Disclaimer: The information contained herein or as an attachment is intended solely for the individual or entity to whom it is addressed and may contain confidential and/or privileged material. All information is believed to be correct but accuracy cannot be guaranteed. Opinions expressed are subject to change without notice. All investments are subject to financial risk and there can be no guarantees that performance results will meet or exceed expectations. Any review, retransmission, dissemination, or acting in reliance on this information by persons or entities other than the intended recipient is prohibited. If you have received this transmittal in error, we apologize for the inconvenience. Please contact the sender and immediately delete and/or shred all copies. Thank you.

Stumbling on Happiness (Summary and Applications)

Daniel Gilbert, Stumbling on Happiness (New York: Vintage Books, 2005).

Many of our money decisions, both investing and spending, involve imagining how these decisions will pan out in the future. Many of our plans and decisions are made by asking the question, "What will make us happy?" But how accurately can we predict what will make our future selves happy? Will working a different job, living in a different location, or trading in our present family for a new one really make us happy? Harvard Psychologist Daniel Gilbert contends that our brains often fool us into choosing wrong paths to our future happiness. By better understanding how our minds work to construct our often skewed visions of future happiness, perhaps we can aim better at finding true happiness. As Gilbert puts it:

"By the time you finish these chapters, I hope you will understand why most of us spend so much of our lives turning rudders and hoisting sails, only to find that Shangri-la isn't what and where we thought it would be."

Gilbert is a great writer, entertaining as he educates. Almost every page gives me something to smile about. Often I find myself laughing aloud. Sure, he does his homework, pulling together research from psychology, cognitive neuroscience, philosophy, and behavioral economics. But then he presents it in a captivating, humorous style. That's my kind of book!

So far (I'm on p. 178) he's big on describing the problems but short on suggesting solutions. I'll concentrate on my proposed solutions to the problems.

Here are my takeaways:

1. Happiness is one of, if not THE, most fundamental want in people's lives. p. 36 - "Everyone who has observed human behavior for more than thirty continuous seconds seems to have noticed that people are strongly, perhaps even primarily, perhaps even single-mindedly, motivated to feel happy. If there has ever been a group of human beings who prefer despair to delight, frustration to satisfaction, and pain to pleasure, they must be very good at hiding because no one has ever seen them. People want to be happy, and all other things they want are typically meant to be means to that end. Even when people forgo happiness in the moment - by dieting when they could be eating, or working late when they could be sleeping - they are usually doing so in order to increase its future yield."

Freud put it this way, "What do they (humans) demand of life and wish to achieve in it? The answer to this can hardly be in doubt. They strive after happiness; they want to become happy and to remain so."

Blaise Pascal said, "All men seek happiness. This is without exception. Whatever different means they employ, they all tend to this end. The cause of some going to war, and of others avoiding it, is the same desire in both, attended with different views. The will never takes the least step but to this object. This is the motive of every action of every man, even of those who hang themselves."

I'm trying to explore the many and varied implications of this. Here are a few:

• Educators, employers and parents have tremendous leverage to use here! We can't assume that every child wants to be a great athlete, great intellectual, amass great wealth, be married, or have a nice house in a nice subdivision. Assuming that these ends are desired and trying to motivate on those bases will make you miss your motivational mark. "But I don't want to have a big house," many youth will mentally object when you try to use that end as a motivation to do their homework or save their money. But we CAN assume that they want to be happy, so find studies and people stories that connect doing homework or saving money to finding happiness and you just might have their attention!

• Study and analyze and debate about and reflect upon the things that lead to happiness and misery. Isn't this, in the final analysis, more important to our future success than memorizing the presidents of the United States or Kings of England?

• Find ways to put our understanding of happiness into handy acrostics and hook them to devices that embed them in our minds and make them easy to apply.

• Take specific lifestyle issues that we want to influence people about and reflect upon them with relation to the ultimate happiness. Example: many studies show that the best sex happens in the context of a secure, committed, long-term relationship - what we traditionally call marriage. Early sex with multiple partners can put a lifetime of good to great sex in jeapardy, with the threat of STD's, etc.

2. Acquire a healthy skepticism about my assessment of past events. In order to save brain space and allow us to make quick decisions, our brains tend to assign a title to an experience and save that title rather than the entire experience. Thus, if I heard an orchestra and thought afterward, "It was generally good but I felt it ended poorly," I might remember only that it was second rate. I can't rewind to experience it again and retrieve all of my original feelings.

Thus, when I say that "I hated Middle School" or that "my high school years were the best of my life," I've probably wiped out huge blocks of experience which, if I could bring them back, would cause me to reassess.

Additionally, we tend to remember past emotions and events in the light of today's emotions. When college students changed their minds about an issue due to a persuasive speech, they "remember" that they always felt that way about the issue.

3) People can experience high levels of happiness in seemingly difficult circumstances. Lori and Reba Schappel are Siamese twins, joined at the forehead. Yet, they are joyful, playful, and optimistic. They say emphatically that they do not wish to be separated. That's not weird among Siamese twins. An exhaustive search of the medical literature reveals the "desire to remain together to be so widespread among communicating conjoined twins as to be practically universal." They truly enjoy being together and don't pine for privacy.

You might object, "But they don't know what it's like to experience independence and privacy. If they experienced it, they would realize that they're not nearly as happy as they could be."

Gilbert argues against this view, saying, in part, that although Lori and Reba can't know what privacy would be like, neither can we know the depth of communion and sharing that they experience. They certainly show every outward sign of happiness, with Reba having recorded an award-winning country music album and Lori being "outgoing, wisecracking" and following her dreams as well.

4) New experiences can influence our future assessment of happiness. Gilbert first smoked a cigar in high school. Although he doesn't smoke regularly, he can't get the full blast of pleasure out of kicking back and relaxing in a lounge chair at a beach resort without having a cigar in his mouth. It makes one wonder...had he never experienced a cigar, could he experience the same amount of happiness at the beach without one? It reminds me of alcoholics, or any fans of alcohol, who can't imagine a social event without a drink in their hands. Are they really having more fun than the others at the social, or have they simply acquired a habit that they now have to continue in order to experience the level of happiness that others are experiencing without the alcohol? The bottom line? Be careful what you experience even once!

5) Question my ability to picture my ideal future. Every day we're making big and small decisions based on what we think will give us the greatest amount of happiness. "If I can win 'Teacher of the Year' I'll be happy." If I marry her, I'll be happier than if I marry her. If I order the Big Mac, I'll be happier than if I order the Quarter Pounder." "I'd be happier as CEO than as a labor union activist."

Gilbert puts that last statement to the test with a real-life example. Adolph Fischer's labor union challenged Chicago's powerful industrialists and he found himself facing a hangman's noose as a result of trumped-up charges. He surprised everyone by declaring with his last words, "This is the happiest moment of my life."

George Eastman became one of the richest men in the world by developing the revolutionary Kodak camera. "On March 14, 1932, the beloved inventor and humanitarian sat down at his desk, wrote a brief note, neatly capped his fountain pen, and smoked a cigarette. Then he surprised everyone by killing himself."

Before Eastman's suicide, how many people would have longed for his life of super-wealth and success. Apparently, our dream of what life would be like in his situation doesn't match what life was actually like in his situation.

"Mr. Destiny" is one of my favorite films. James Belushi plays Larry Burrows, a man who married a sweet by slightly dingy girl who can't seem to keep enough of his favorite cereal in the cupboard. His working class home and working class wife and working class job and working class friends are OK, but he blames his mediocre existence on one event: the day he struck out on the last play of the biggest game of the season in front of a crowd that contained everybody that was anybody. "If I'd only hit that ball," he often found himself musing, "my life would have turned out differently."

So the controller of destiny mixes up a drink that puts Larry into the other life - the one he would have lived had he hit the ball out of the park. He married the homecoming queen, who's dad made Larry the CEO of his company, which allowed him to live in a mansion with all the toys and cars he could dream of.

At first, Larry was ecstatic. But soon he found downsides to his new life. His workers hated him, including the best friend and wife from his former life. A power-hungry associate was out to destroy him. Rich folk's wines sucked in comparison with his "Brewski" beer.

When he got the life he always wanted - the one he always envisioned bringing him the ultimate happiness - he discovered that the new circumstances didn't bring about the expected happiness.

Solomon once said that we never know another man's joys or sorrows. How apt! Before you envy the CEO, the movie star, the guy all the girls like - remember that you see a small portion of that person's life. If you saw the whole, you might thank God daily that you don't have that life.

So how do we recognize the potential flaws in our dreams and tweak them to make them more accurately represent what would really make us happy?

6. Understand how my dreams of the future get skewed. (more to come)

One More Thing I'd Like to Know

The books I've read on this issue (how our brains fool us) often summarize studies with statements like, "people in this study tended to be more optimistic than their available facts warrant." That's interesting, but I'd like to know what percentage of the people were too optimistic. Fifty-one percent? Ninety-nine percent? Both percentages could be described by the statement that people "tended to be more optimistic," but it makes a huge difference in how I assess the extent of the problem. Surely some of us are more objective about our abilities and assessing our futures than others. If not, shouldn't we all assume that we're being too optimistic when we assess the odds of our new business succeeding? If so, we should all adjust our expectations accordingly when making decisions.

On Money and Happiness

The final chapter of my book, Enjoy Your Money, addresses the relationship between money and happiness. When does more money make us happier? When does it not? I pulled part of my research from psychologist David Myers. Here's a summary of one of his books:

David G. Myers, The American Paradox: Spiritual Hunger in an Age of Plenty (New Haven: Yale University Press, 2000)

Why do we have more stuff and comforts than we've ever had, yet people report more misery and dissatisfaction with life than when people had much less? Thus the paradox that Myers, a respected social psychologist, tries to explain.

Citing abundant studies and reflecting on their accuracy and meaning, Myers concludes that, although money helps our happiness when it lifts us above the poverty line, it doesn't really help our well-being when it grants us more than we need. Supporting this thesis are studies that find lottery winners initially exuberant, but later adjusting to their former level of happiness. Similarly, accident victims who lose their eyesight or find themselves suddenly quadraplegic, initially fight depression but eventually find themselves with about the same level of happiness as before the accident.

Who finds themselves less happy than others? Those who strive most for material wealth. How fascinating! While many give lip service to the religious teachings and wisdom of the wise who insist that "it's better to give than to receive" and that "real happiness comes more from caring relationships than accumulating lots of stuff," Myers demonstrates from study after study that these teachings are true.

Myers comes with sound credentials. As professor of Psychology at Hope College, his research and writings can be found in over sixty periodicals. His psychology textbooks are used in nearly one thousand colleges and universities.

Applications

1. Poverty isn't good. Some may cry "duh!", but many hold a noble ideal of leaving the corporate rat-race, working minimum wage or part-time and earning minimum wage and playing their guitar on street corners for spare change. Others are so mission-minded that they want to live in the ghetto and serve those around them. While this may be fine for singles, it's not good for raising children. They'll likely grow up in fear, choosing the wrong role models in a crack neighborhood. Plan on making enough money to live in a decent neighborhood, send your children to decent schools, and have decent health care. Find ways to help those who are in poverty and support policies that help people out of poverty.

2. Materialism leads to misery. Studies show that those who strive most for wealth are less happy than those who put relationships first.

3. Do everything we can to promote stable families. The sexual revolution that started in the 60's brought more misery than happiness. The best sex happens in the context of a committed, long-term relationship - what we traditionally call marriage. Much of the depression and anxiety and maladjustment and violence of youth can be traced directly to their unstable homes. Sure, we all need a village - but we also need a family. Much, much research shows the power of the stable family unit to produce productive, happy children. A huge amount of today's poverty can be a attributed ruptured families that must survive with single parents. Promote government policies that promote stable families. Stay faithful to your spouse and children.

4. Promote living for others and community rather than radical individualism. Myers identifies the latter as one of the most remarkable characteristics of the present age. It's also the root of much of today's misery. This has been a huge shift in attitude since the 50's. Today, people typically seek personal peace and affluence above all else. Paradoxically, those who strive hardest to satisfy me, me, me end up less satisfied with life than those who are more concerned with others. The most obvious place we see this is in marriage. Those who go into it for what they can get end up unfilled and often divorced. Those who go into it with more selfless aspirations get the most fulfillment.

5. Character education must continue to grow and prosper in our schools. Communities agree on many traits they want to see in their students, such as honesty, diligence, concern for others, etc. Schools have the responsibility to partner with parents and community leaders to reinforce these traits in the school.

6. Religion is a positive force in the world. Sure, there are plenty of examples of religious people and organizations who've been negative. But when you look at the big picture, religion has been extremely positive for the world. The vast majority of work with the poor and down and out is done directly by religious organizations or done through secular organizations by religous people. Deeply religious people also report significantly greater happiness than the irreligious.

7. Involvement in corporate worship is essential for spiritual growth. The individualism of our age impact many people's approach to religion. They see little need to meet with other religious people when they feel they can just as easily worship and please God on their own. Yet, Myers sites numerous studies that find that meeting with people of similar beliefs strengthens your own beliefs. Also, studies find that those who don't meet with other believers neither serve nor give like believers who take corporate worship seriously.

Saving on Repairs: A Few Simple Questions That Can Save Hundreds of Dollars

When I have to get something repaired - whether it be my dishwasher, car, lawnmower or leaky faucet - I've started asking a few simple questions that are starting to reap benefits. Here's what they are (specific to my lawnmower):

Question #1: When people bring in a lawnmower that won't start, is it typically the same few trouble spots 80% of the time? (They almost always answer "Yes!")

Question #2: What are the typical problems? (Example: clogged air filter, low oil, needs new spark plug.)

Knowing the answers to these questions for my plumbing, lawnmower and furnace (change the dirty filter!) saves me hundreds of dollars.

Example: Yesterday I took my pushmower, which wouldn't start, to the cheap-o repairman down the street who works out of his home (I reasoned: "low overhead can lead to lower prices.") I asked him the questions, to which he replied, "new spark plug, clean air filter, change or put in new oil."

You might think people would be reluctant to share their secrets, but I find them honored by asking for their wisdom within their area of expertise.

Next, he said he wanted to pull off the air filter to check the carburator, so that he could give me a better estimate as to what the repair will run me. As he looked into it, he grimaced to inform me that the carburator was all black, indicating that he'd need to rebuild the carburator. Also, he'd need to do a full service (filters, plug and oil), and oh yes, that blade needs to be replaced. The bottom line - $100 worth of repairs.

It was my turn to grimace as I told him politely that I'd rather not spend so much on something I could buy new for $135, so I put the mower back in my car and went my way. On a whim, I stopped at an Auto Zone and purchased a new spark plug for $1.50. When I got home, I put in the new plug (about a two minute process) and cranked it up. It hummed like a new machine and has worked fine ever since.

A couple of things about that episode keep reminding me of the word "shyster." First, he didn't want to replace the carburator - he wanted to "rebuild" it, meaning that if he did nothing to the existing carburator, I would have never known without being a mechanic and taking it apart. Second, call me a mechanical idiot, but a mower blade has a lot in common with a knife - if you sharpen it and it cuts stuff, it probably needs no further repair.

So, whether I'm dealing with honest repair people or shysters, here are my lessons learned for saving money:

• You often don't have to know everything about a product to be able to do simple, routine repairs.
• Doing a simple repair myself gives me a wonderful feeling of independence and "beating the system."
  
• I can often save myself loads of money - in this case, $98.50, which might be the equivalent of $200 earned, once FICA and taxes are taken out of your earnings.
• Keep asking the question, "What are the most common repairs that most people need?" The answers may save many thousands of dollars over a lifetime.
• Don't brag to your wife or mother after you've made a successful repair. They'll start asking you to fix everything.
  

Other ideas for saving on routine repairs? Post some ideas!

Making More by Saving More: How I Plan to Make $2000 More Dollars This Year With My Writing

I plan to save $1500. That's it.

No, the difference in numbers isn't a typo. Let me explain.

Money management gurus drive home the need to curtail spending. They often put it this way:

"A dollar saved equals two dollars earned."

Here's their angle: If you want to net $1 more through writing this year, you can do it in one of two ways:

#1: Earn an extra $2. If you're in a higher tax bracket, half of those earnings will disappear in the form of taxes, leaving you with your $1.

#2: Save $1. You keep it all. The IRS doesn't tax savings.

Now I'm not in a high tax bracket, so let's imagine that for me, $1500 saved equals $2000 earned.

The amazing thing is that the way I'm saving won't hurt me at all. It's not like I'm committing to eat Ramen Noodles for the rest of the year, or cutting my marketing budget. I simply compared prices on some of my services and winged better deals.

My primary savings came from changing my merchant account (the company that processes my credit cards for online purchases of my writing.) Cherie had been complaining for some time that too much of our earnings were being eaten up by our merchant account. I'd always respond, "Well, you know we compared before we got the service several years ago. I guess it just costs a lot."

But when they said they decided to charge us $40 more per month (ostensibly in order to serve us better!), I fired up my calculator and began asking around about the top merchant services. One ministry said they had changed merchants every two years, because companies would advertise a killer rate, inching up to an exorbitant rate before you knew what had hit you. He ended up with PayPal. I'm making the change, which should save me about $1200 per year. (Before the increase, they were charging us over six times the amount that PayPal charges for the same service!)

I've also found that you can bargain with Internet Service Providers. Mine was charging me about $70 per month for DSL wireless (allowing me about five computers to access). I got an advertisement in the mail that said I could get a competing service for about $45 per month. But I didn't want to go through the hassle of changing (change e-mail addresses, etc.). So I called my provider and said, "I like you guys, but your competitor is offering me the same service for $45 per month."

"We can beat that," he said. So immediately I began saving another $300 per year.

In my book on personal finance, I quote the CEO of Wherehouse Music as saying,

"Manage costs, not revenue. And remember that there is no such thing as a fixed cost."

Cutting costs frees up writers to take the assignments and write the books we're passionate about, rather than having to always go for the best paying. Extend this to paying less for houses, cars, etc., and you'll be that much closer to making a decent living from your writing.

Why This New Blog?

Since I'm doing final edits on my latest book - Enjoy Your Money!: How to Make It, Save It, Invest It and Give It - it seemed wise to begin blogging on the topic, especially since my research yields so much more than my book can contain. I plan to deal with a wide range of aspects of personal money management.

I'll post my book summaries and reviews from my reading on money, what's working and not working with finances in my own family, etc.

Thoughtful and practical. Those words will drive this blog. Hope to hear from you!