We learn many powerful lessons throughout life, but rarely apply the principles and practices to all relevant contexts. As mentioned in the video below, many appreciate and apply the concept of diversification to financial investments, but they apply equally to skills. The novelty of initial experiences can wear off, technology can negate any value, etc.
Category: Financial
Using the 5 Whys to Quickly Address Problems
“Paralysis by analysis” is a risk with problems of all kinds. Consequently, people will often ignore issues or apply so-called band-aid solutions, which do little to address the root causes. Any problem will have multiple root causes, better represented in a tree diagram or fishbone. Unfortunately, these deeper analyses can be complicated and time consuming, when most situations require rapid action.
The solution: Find a single root cause, and address it. This is represented as the “5 Whys” in several frameworks. For any problem, ask and answer “Why?”, using each response as the next question; until you find an appropriate root cause, somewhere around the 5th round.
For example, I spend too much.
Continue reading “Using the 5 Whys to Quickly Address Problems”Risk factors of owning a car
Owning a car can seem like a requirement in many regions. The necessity may be true at this moment, but several forces are reducing the need for, and cost of, car ownership. Even if you decide to buy a car, the following factors encourage spending less. The uses of owning a car are challenged by new alternatives, while the cost of future production faces downward pressure.
Production automation
Continue reading “Risk factors of owning a car”Capping Investment Value
Diversification is an abstract concept, it can be easy to understand why to diversify, but not how. True diversification requires each set to be completely unrelated (no correlation). In other words, if one effort fails, the negative effects do not harm others. This ideal is generally impossible, as all things are linked to some degree, but it is certainly possible to keep the effects of any one catastrophe to one or two groups.
To start, create a simple cap for each investment group, a number small enough that it wouldn’t ruin your life to lose the entire value. Many will argue based on percentages, but that number fluctuates constantly, and doesn’t account for your psychology. For example, you could put no more than $25k into any set. This is the minimum buy-in for many investments, and plenty high for most of us.
The Ideal Pace for Paying Down your Mortgage
The answer depends on 3 main factors:
- The total debt
- This is largely redundant, but the cost of debt changes relative to this value.
- The cost of debt
- Revenue from the debt
- If you couldn’t buy exactly enough for your needs, nor use all of it, all the time, there should be some revenue from your property.
- Deduct costs normally covered by rent. Condo fees, for example.
Taking those values, we can project the cost, or earnings, of the investment.
As shown in the chart above, there is an equilibrium rate that would offer a steady return, no matter how much debt. As the relative return decreases, the cost of debt decreases equivalently. The two other patterns offer radically different reactions. If earning less than equilibrium, it would best to move rapidly through the steep part of the curve. Conversely, if you earn over equilibrium, make only the regular payments, and focus on other opportunities.
Continue reading “The Ideal Pace for Paying Down your Mortgage”The surprisingly long list of free activities
To fight the assumption that I need to spend money to enjoy myself, I drafted a list of essentially free, and generally enjoyable, activities. Depending on your supplies and equipment, some of these options will not be free. Plenty are free for anyone. To avoid a repetitive list, I’ve broken the list into broad categories:
Continue reading “The surprisingly long list of free activities”Taking advantage of the 4% Rule
The 4% Rule is a quick estimate of a safe withdrawal rate for retirement, given reasonable long term returns. There are many variables which can make this value conservative or aggressive, but it’s a good starting point. It also provides an interesting layer for the Stairway of Spending:
Simulating Different Spending Levels
Why should you simulate different spending levels? Spending decisions quickly become habit, and normalized to the point where we fear any reduction will ruin our lives. The Stoics, among others, recommend practicing the fates we fear. Preparing for possible changes builds resilience, with opportunities of discovering preferred states. In other words, you might end up enjoying parts of a lower cost lifestyle. You can jump right into the most extreme scenarios, but I recommend looking at $5,000 increments:
You will realize, as I have, that certain levels are easier to reach with different reductions. In my case, housing isn’t as pleasant to reduce, until I make a significant change. Conversely, I wouldn’t add much to housing if I spent more. I’d rather fund experiments and exploration, which I’ve categorized as part of shopping and entertainment. Exploring the examples, I preferred simplifying most of my shopping and groceries. Not only did I save money, but time and energy freed from constantly searching, selecting, and managing purchases.
After deciding how you would live at different spending levels, it is important to consider how much you want to work to maintain your current spending. Would you reduce spending to work less often? Maybe retire earlier?
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Free Audiobooks and eBooks!
I stumbled upon Loyal Books when searching podcast topics. They allow you to stream and download recordings in several formats. I like having them with my podcasts, as I prefer the interface. If you would rather have a dedicated application, Loyal Books offers both Android and iPhone apps.
Recorded by volunteers, quality can vary from chapter to chapter. You can go to the website, or use the apps, to see reviews of each recording. In their defense, I have listened to my share of lacklustre samples from Audible. Audible disappoints less from sound engineering than narrator style or interest. Conversely, the variety of volunteers also supports recording books from over 30 languages. I am now considering using them to brush up on my french, and get exposure to other languages.
If you don’t know where to start, I suggest Meditations by Marcus Aurelius. The entire book is a collection of the Roman Emperor’s journal entries. Most people find him through Stoicism, along with Seneca, but anyone should find his insights fascinating.
How I Used TextNow to Save 60% on my Wireless Plan
About TextNow
TextNow is a North American service offering talk and text over internet. In the US, they offer cell phones and data plans, in addition to the usual talk and text. As a Canadian, I only have access to their application, which provides a local number and free unlimited calling and texting to North America.
Using TextNow
I pay the 4 USD/month to hide ads, lock my number, and block telemarketers. They also offer call forwarding, for those who want a second line. By having to use their application, certain methods of phone number verification won’t work. I preferred texting through other applications, but contact only a few people through SMS/MMS, so I barely notice. I used to hate fighting terrible reception in my office, but can now use WiFi for a reliable connection. I have noticed some services block VOIP calls, which seems odd.
My Favorite Part
Until last month, I spent $80/month, after tax. I only bought unlocked phones, which allowed me to keep an old talk and text plan with unlimited data. Even with reckless usage, I rarely surpassed 5GB monthly. Only needing data, I converted to a 5GB data plan for a jaw dropping $20/month! With taxes, and TextNow Premium, my new bill is just under $30. I more than halved my bill, without sacrificing anything I used before. If I could stand the ads, and wanted to be careful with data usage, I could reduce my after tax bill to $20.