Starting to Save…. Tomorrow

Heya! Sorry for being gone for so long – work has been absolutely crazy lately. (But in case any of my employers are reading this, I love my company. Hugs and kisses, xoxo). Just spent the last two days on leave (or “time-off” as they say in the US of A), sitting at home… and crunching numbers for work. Yeah, you know I’m baller like that.

Anyways, that’s why I’m hoping you’d forgive me for blogging my Ted Thursday post on Saturday. Today’s Ted talk comes from Shlomo Benartzi, entitled Saving for Tomorrow, Tomorrow. I loved it because it pretty much espouses everything that I’ve blogged about on saving so far. (I also love his accent – still trying to figure out where the hell he’s from).

Here, he points out three problems we face in behavioral finance, and then gives you a simple solution that will solve all of them – the same one I’ve been preaching for the past 3 months. Yes, I know, all the ladies say I should totally be on TED. Anyways, in summary:

1. Present bias: We know we should be saving, but we don’t do it today. We’ll make all these resolutions that we’re gonna save more next year, next month, next week, whatever, but it never works. It’s always a lot more fun to spend more today, and put off what we know is good for tomorrow.

Quote at 6:47 of the video: “Self-control is not a problem in the future. It’s only a problem now when the chocolate is next to us.” 

2. Inertia: People are lazy. And don’t even think that you’re different from the rest of us, because you’re not. Even checking a box on a form, is way too much effort for most people, even if it means saving someone’s life. Germany has an opt-in program for organ donation where you would have to check a box if you would like to donate your organs. Contrast it to Austria, which has an opt-out program, where you would check a box if you don’t want to donate your organs. The result? 12% of Germans take up the program, while a whopping 99% of Austrians agree to donate their organs.

3. Loss aversion: We hate losing stuff. When it comes to savings, people amazingly frame this as a loss because they have to cut their spending today.

So where does that leave us? The trick to overcoming all of these problems is to (surprise, surprise) adopt an automated system that saves on a regular basis, and whenever you have any income increases. Since saving more tomorrow is easier than saving today (present bias), we first make the commitment to save a certain percentage of our income… tomorrow. Or next month. Whatever. We then commit to it by setting it up with our bank.

Once it’s set up, that overcomes our problem of inertia, because it takes a helluva lot of effort to cancel that commitment. So we’ll automatically be saving without any effort at all. And finally, by committing to save a fixed percentage of our pay rises, you’ll be taking care of loss-aversion by allowing yourself the luxury to spend part of your pay rise, while saving the other part of it.

In fact, if you’re way ahead of the game, Imma challenge you to save a higher percentage every time your income rises. Say you start off with an income of $3,000 and you save 10% ($300), leaving you $2,700 to spend. When your income rises to $3,500, up the ante to 15% ($525). You’ll still have $2,975 left over to spend, which is more than what you were spending on your original income anyway.

Random: There’s also a shoutout to Singapore at 16:47 of the video – apparently we hold the record for lottery ticket purchases. According to Benartzi, the average household in the world spends $1,000 a year on lottery tickets, while the average household in Singapore spends $4,000 a year on lottery tickets. WTF?! Seriously, what is going on here? Buying the occasional ticket is fine (and it’s helluva fun to trash talk in the office about handing in our resignation once we win our $10 million dollars), but throwing away $4,000 a year is just stupid. Fellow countrymen, try saving it instead 🙂


Be Choosy About Choosing

Today’s TED Thursday talk (woah, talk about mega alliteration – yay literary devices!) is about choosing. Or more precisely, how to be choosy about choosing. Sheena Iyengar raised an interesting point about how having more choices may not actually help you, but cause you to give up altogether.

Last week, I was trying to figure out what I should blog about next, so I asked several friends what they thought was the biggest challenge that prevented them from investing. I expected the answer to be something like “because I’m afraid of losing money”, or “because I don’t know enough about it”. But I was wrong. Surprisingly, the number one reason why people don’t invest their money is because there are way too many choices out there.

The more I thought about it, the more it made sense. There are dozens of things you could invest in: stocks, mutual funds, REITs, fixed income, ETFs, futures, options, foreign exchange, commodities, unit trusts, money market funds, art, wine, etc. And within each category, there are even more choices. Take a boring product like fixed income: there are government bonds, corporate bonds, CDs, zero coupon bonds, high yield bonds, junk bonds, bond indexes, bond funds.. Wanna buy stocks? There are literally thousands to choose from in any stock market around the world. It’s enough to scare the shit out of any novice investor trying to get started in investing.

First, let’s agree that investing is generally a good thing. Keeping your money in your stupid POSB savings account earning zero-point-lame % per year is not going to make you rich. What about bonds? For the past 200 years, bonds would’ve squeezed you about a 1% return rate after inflation. Stocks, on the other hand, have yielded an average of up to 7% each year after inflation over the last 200 years, according to Wharton professor Jeremy Siegel (Totally irrelevant but I used to crash his classes while studying at Penn and he’s a helluva awesome. And smart). So yes, investing in riskier assets, especially while you’re young and you have many years of income ahead of you to ride out the risk, is generally a good thing for us young, sexy, just-started-working adults.

We know that investing is good, but we’re just so damn overwhelmed by all the choices out there. Well you know what? I’m a big fan of the 85% solutiongetting started is way more important than becoming an expert. From I Will Teach You To Be Rich:

“Too many of us get overwhelmed thinking we need to manage our money perfectly, which leads us to do nothing at all. That’s why the easiest way to manage your money is to take it one step at a time – and not worry about being perfect. I’d rather act and get it 85 percent right than do nothing. Think about it: 85 percent of the way is far better than 0 percent. Once your money system is good enough – or 85% of the way there – you can get on with your life and go do the things you really want to do.”

Over the next couple of weeks/months, I’ll be blogging about some simple, straightforward assets you can start investing in. Really basic, nothing fancy – you won’t have to learn about stupid terms like “ROI” or “derivatives” or “CAGR” – but they’ve been proven to beat at least 80% of the popular, expensive, actively managed unit trusts out there. Hint: They don’t involve watching the market every day. Stay tuned.

Why Work Doesn’t Happen At Work (and What You Can Do About It)

It’s TED Thursday again! This week’s TED Talk is one of my favorites – it’s about how we all spend the majority of time at the office, but it’s paradoxically one of the least effective places to do your work in. In the office, we’re constantly bombarded with a flurry of emails, calls, meetings, and that one annoying colleague that seems to pop by your cubicle at the WORST times ever. Which leaves me wondering: how the hell does anyone get anything done in this place?

Jason Fried offers a couple of solutions: 1. No Talk Thursday, 2. Passive Communication & 3. Canceling Meetings. While I highly respect Jason and those are cool ideas to think about (I love his description of managers – that they were put on this earth to interrupt people), I think he needs to delve a little deeper and address the crux of the problem here: that we’re all in a system that encourages you not to do effective work in the office.

Damn Reports, Meetings and Managers – not (that) evil

Most people find it hard to do actual, tangible, meaningful work at the office because they’re tied up with a stupid report or a lame meeting. No, I don’t care what you say about reports and meetings – when was the last time your customers ever told you “Hey, good job on that meeting / TPS report you did!” Yet, we have to understand that it’s part of a system, and meetings and reports are actually surprisingly necessary especially if you work in a large corporation, like I do. As a company gets larger and larger, it needs to spend more and more resources on coordination, governance, pleasing shareholders, etc. Without meetings and reports, giants we’ve grown to love like Coca-Cola, Mircosoft, IBM and Proctor & Gamble wouldn’t exist. So yes, there is a reason to this necessary evil after all.

Another hard fact of working life in a large corporation: managers. It’s not that they WANT to interrupt you from doing meaningful work, it’s because they don’t have any other choice – it’s their job. Think about it: You and I get things done by setting aside half a day and focusing our energies on a particular project. We zoom in on a problem, define which areas need to be improved, craft some possible solutions, test them out, and put them into practice. Bam! Our customers’ lives are improved. Yet, for managers, they don’t have the time to go into all that detail. Their job is to manage a dozen or more of these projects – their job is to figure out what the hell is going on with them, then delegate tasks to people like you and I. THAT’S why they hold so many damn meetings and need us to submit so many reports. They practically spend all their time attending meetings and reading reports – because that’s how they get things done. They’re not evil (well, most of them anyway), they’re just doing their job.

So what the hell can we do to get stuff done around here?

We’re not going to be able to change those facts of corporate life. Managers, meetings and reports will always be there, whether we like them or not. If you can’t stand them, go become an artist. So I don’t think Jason Fried’s recommendation of canceling meetings really addresses the crux of the issue. Neither is designating half a day per week for total silence going to help out that much. Here’s my take on what you should do to get actual work done in the office (so much to say on all these tips, but I’ll talk more about them in subsequent posts!):

1. Do one thing, with no distractions. Literally close your email client, download everything so you can work offline, and go to somewhere private like a conference room to really work on something. This is an extension of No Talk Thursday, but I think we’ve gotta extend that to become a lifestyle. I try to do some sort of variation of this on a daily basis, from a couple of hours to almost the entire day.

2. Ruthlessly reject meetings you can’t add any value to. Here’s a good guideline: Every time you get invited for a meeting, ask yourself if you’ll be actively contributing to it (ie: speaking and giving your input throughout the meeting). If not, then you’re not needed there. Reject the invitation and read the minutes instead. Meetings have two purposes, and two purposes only: conflict, and coordination (I freakin HATE meetings that are called to inform everyone about stuff). And if you’re attending, you’d better damn well be actively contributing.

3. Don’t spend too much time on reports. Literally shave it to its bare minimum. You think anyone besides you is going to read anything more than 2 pages long? Your report is a necessary, but boring, fact of life. Do it if you have to, but don’t let it stop you from doing real, meaningful work.

How to Make Work-Life Balance Work

Today’s TED Thursday features an awesomely eloquent and honest talk by Nigel Marsh on work-life balance. Most of the self-help / motivational / bullshit literature on work-life balance give you useless platitudes: “Go to the gym in the morning! Skip lunch so you can meet friends for dinner! Wear jeans to work! (Seriously, wtf) Sleep with your boss!” These simply don’t work because they don’t attack the absolute core of the problem: that most people are “working long hours in jobs they hate, to buy things they don’t need, in order to impress people they don’t like.” Nigel lays out four things to think about when you’re trying to deal with this problem:

1. Acknowledge the reality of the situation: If your career choice is fundamentally incompatible with you having any sort of life outside of the office, then it’s time to rethink your priorities.

2. Governments and corporations are not going to solve this problem for you. You, and you alone, have to be responsible for setting and enforcing the boundaries between your work and the rest of your life.

3. Be careful of the timeframe by which you judge your work-life balance. Realistically, you’re not going to accomplish 10 things on your to-do list and end work at 5.30pm every single day. Occasionally, it’s fine to stay a little late, as long as you’re happy with your overall work-life balance as you look back over the past quarter or year.

4. Approach work-life balance in a balanced way. Don’t aim for major, radical changes that require a lot of effort. Instead, aim for small, incremental changes – you’ll be surprised at how transformative they are.

I remember that just a month ago, I was a soulless, lifeless, depressed, most stressed son-of-a-bitch in the office. (Yeah, the fact that it was Christmas season didn’t help either). I had way too much work on my plate, snapped at my colleagues, couldn’t focus on getting my s**t together, and hated my life. Sound familiar? Most websites offering you advice will never admit that they’ve had low points in their lives, but that’s cause they’re either 1) lying or 2) unemployed. Let’s be honest, you’re going to have some low moments, no matter how much you love your job.

When you’re in that state of mind, it’s important not to generalize that particular phase of your working life to your entire job. Do I actually hate my job? Nope. I definitely hated the feeling of being stuck in a rut, but I also knew that it wouldn’t be permanent.

How I dealt with it is a whole series of posts by itself, but in a nutshell:

1. I enforced boundaries. I told myself I would leave work at 6.30pm no matter how much crap I had left. It was pointless staying later than that anyway – I didn’t get much work done, and it sucks to be wolfing down McDonald’s at 10pm for dinner cause that’s the only thing that’s open. I also took a couple of days off to let some non-urgent problems miraculously solve by themselves. (Try it – it actually works).

2. I made a couple of small changes – enforcing the 90-minute sprint rule, picking just one important thing to accomplish that day, and realizing that my job wasn’t to impress anybody by accomplishing 10,000 things, my job is to pick the most important things and do them a helluva well.

That’s pretty much it. It’s amazing what a couple of days off and a re-evaluation can do for your soul, and your work. Give it a try.

Less Stuff, More Happiness

Decided to start a regular series called Ted Thursdays, where I’ll share some of my favorite videos every week. If you haven’t already checked out or heard of Ted, maybe you should stop watching porn and start doing something meaningful online.

I -love- I use their app to watch videos on the long-ass bus/subway ride to work as a way to get thinking, to get motivated, or just laugh my ass off (much to the annoyance of other grumpy sleepy commuters).

Today’s Ted talk is a short, 5-minute video on how having less stuff could lead to more happiness. (Or the deliciously simple ” <=> “) Graham highlights three ways you could make this work:

1. Edit Ruthlessly

2. Think Small

3. Make Multifunctional

While this is meant to apply more toward design principles, I don’t see why we can’t use it in life. Yesterday, I got a helluva frustrated because a computer glitch caused a ton of emails, that I had carefully sorted and archived over the past year, to be spat out, unsorted, back into my inbox. A quick glance through made me realize that I will never, ever reread or use 98% of them, yet I was spending hours and hours archiving and sorting them out every day. A simple solution: that little button marked “DELETE”. At first, I was a little apprehensive at the prospect of deleting something potentially important, but who am I kidding – if it was THAT important, there will be other ways of retrieving it, without wasting precious hours archiving things I will never use. It’s an invigorating feeling to delete 1,463 emails at a go. You should try it.

This New Year, take the opportunity to ruthlessly cut the junk that’s been building up in your physical and digital property. As you’re faced with new stuff, give yourself a bias to delete rather than to store. You’ll free up some mental capacity and get re-invigorated to start doing something REALLY great. Here’s to a less cluttered, happier, new year 🙂

(PS: Yes – I’m fully aware that today is actually Friday. I fell asleep, exhausted, after a night out with friends on Thursday. A dude’s gotta live, okay?)