Back Nine Finance

I’ve seen so many articles over the past 2 or 3 years talking about how the “economic downturn”, the “recession” or whatever you want to call it has changed the financial behaviors and philosophies of Americans, as well as people around the world.

No longer is the savings rate negative. That’s right, for the past several years prior to the recession, Americans, on average, spent more each year than they earned. Perhaps this is not surprising considering the amount of home equity (phantom equity?) that was floating around via home equity loans, profits made from house flipping, credit cards, etc. But still, when I hear statistics that talk about a negative savings rate, it is hard to fathom.

Here is just a smattering of financial behavioral changes that I’ve heard and/or read about over the past couple of years:

• Families tend to be more open to the idea of living together (i.e. adult children living with parents, college grads moving back in with parents)
• People are focusing more on paying off debt
• When taking on debt, people are choosing to amortize the debt more quickly (shorter loan term)
• Saving money in any way possible is becoming the new norm (eating out less, shopping at discount stores)
• Having cash in the bank is suddenly a top priority for people

The funny thing, the overall attitude that these actions portray almost seem backwards considering current economic conditions. Consider this:

• Returns on money in the bank (savings interest rates) are currently at historic lows – yet now, more than ever, people want to have money in the bank.
• Interest rates on debt are also at historic lows – yet now, more than ever, people are adverse to the idea of borrowing money.

It’s almost as though people are doing exactly the opposite of what would seem logical based upon the current economic environment.

Should you be a Contrarian?

There are plenty of people who make the very same argument as I am that you should go against the herd mentality and be a contrarian. But, the 2 things that rarely get talked about when promoting contrarianism are this:

1. You have to be sharp enough to spot the herd (i.e. spot economic bubbles)
2. You have to have the guts to act upon your convictions

If you do some research, there are very few people who both saw the housing bubble brewing, and also acted upon their convictions to make a boatload of money from it. It is likely that many people actually saw the housing bubble before it popped (there are tons of people out there who claimed they saw it coming, and it’s likely at least some of them actually did). But very few people actually completed part 2 of the contrarian equation by taking action.

Another example – assume that the stock market is rising rapidly. Everybody and their dog is making a killing in stocks. Conventional wisdom says that you too should buy stocks. But if you look at history, this is precisely the time when you should be selling stocks, perhaps even to the point of shorting them (sell high). In theory it sounds easy, but in real life, it’s hard to spot the bubble, and even harder to convince yourself that you are right to the point of actually putting your money at risk.

That’s why being a contrarian is difficult. That’s also why there’s so much money to be made as a contrarian. By nature, these folks will be the first to spot an opportunity, and be scooping up all the best deals well before everyone else even changes direction (or better yet, before anyone else even sees the need to change direction).

Readers –

Do you ever find yourself doubting a particular investment, just because everyone else seems to interested in it?

Do you think that being a contrarian is a viable investment strategy?

Have you ever spotted economic trends or bubbles? Did you take action? If you didn’t take action, why not?

In response to a blog post I read a couple of weeks ago (I cannot really remember where the post was), I left a comment talking about the fact that my wife and I currently have enough cash saved to cover 14 months worth of living expenses in our “emergency fund”. It’s actually more than this if you consider the things we could cut out in a true emergency, such as IRA contributions and other non-mandatory spending.

Later that day, and several times since then, I’ve thought – what would I do if I really could just take a year off? Of course, there are all kinds of complications to actually doing this:

• We’d almost completely deplete our savings
• We’d essentially have to start our careers over
• We wouldn’t have enough money to do everything we might want to do with a full year off (such as extensive traveling) – we’d only be able to cover our current monthly expenses

But outside of the fact that doing something of this sort would likely severely disrupt your current career path, it’s really fun to daydream about what you might able to do with such a long break from the grind of a job. Workers in the US have less vacation time and other time off than almost every other industrialized nation in the world. Where we usually enjoy 2-3 weeks of vacation per year while our European counterparts typically receive 6 to 8 weeks of vacation time per year. This is a huge difference.

Long, road trip style vacations for us in the US are pretty much out of the question, unless you want to use all of your vacation time at once. Essentially the only people in the US that can take these extended types of trips are college students on summer break, retired people, self employed people, or other folks who are in either in between jobs/careers, or wealthy people who don’t really work anymore at all.

Despite the fact that I do not fit into any of those categories, it’s still fun to daydream about. Here is what I would do if I could take an entire year off from work:

• Embark on an extensive West Coast trip. I’d like to visit Las Vegas, San Diego, San Francisco, Seattle, Portland, etc. Preferable I’d do this by car, and see plenty of interesting places along the way
• I’d work on developing a couple sustainable and money making side businesses (this might require some additional funds for investment, but it might not)
• I’d spend an extended period in the Florida Keys (I’ve been through the keys once, and spent a couple days in Key West – I love the laid back vibe this place has)
• I’d play quite a lot of golf
• I’d exercise more (although for the past couple months, I’ve been working out 3-4 days per week – getting better for sure)

At times I wish I had the guts to pursue a lifestyle that allowed me this type of flexibility. But where I come from, lifestyles are very traditional. You’re expected to go to school, perhaps move on to college, then after that, get a good job and pretty much work for the rest of your life. So far, I’ve pretty much fit that bill. I’ve become accustomed to the security and the predictability that this lifestyle provides, but there are plenty of times when I wonder if there is something I am missing. But it’s hard to find the time, resources, and guts to actually investigate to see what I might be missing.

Readers –

What would you do with a year (or at least an extended period) off from normal work?

Do you ever wonder what you might be missing out on because of the lack of available time off to pursue lengthy adventures/hobbies?

If you haven’t read it already, there was a fascinating post over a Free Money Finance this week entitled Is $250,000 Really Not Enough to Live on?

The post detailed an article that was written over at MSN Money (based upon data compiled by Fiscal Times) in which they asked the accounting firm BDO USA to run a detailed budget for a hypothetical family earning $253,000 per year in 8 different US cities. The analysis included detailed costs for federal, state and local income taxes as well as gas taxes, sales taxes and property taxes on a localized basis. The 8 cities that were chosen were deemed to be “high cost of living cities”. The 8 cities were:

• Huntington, NY
• Pinecrest, FL
• Plano, TX
• Naperville, IL
• Glendale, CA
• Bethesda, MD
• Alexandria, VA
• Washington, DC

The gist of the article was to demonstrate that, despite an income that is deemed to make them “rich” (at least as far as politicians wanting to raise additional tax revenue are concerned), $250,000 in income is just barely enough to get by in these locations. Here are just a couple of the budget line items of this hypothetical family earning $250k per year, who supposedly are just barely able to make ends meet:

• They spend over $13,000 per year on health/dental costs
• They spend $19,000 per year on child care
• They spend about $47,000 per year on housing costs, including cleaning and maintenance
• They spend about $22,000 per year for 2 vehicles including loan payments, insurance, gas and maintenance
• Annual savings are $41,000 per year – $33,000 for retirement and $8,000 in educational savings for children

In all but one of the cities (Plano, TX), the family earning $250,000 has an annual budget deficit of between $2,600 and $24,300.

Where do I even begin?

Let me just say that I don’t want this to turn into a political debate. We can argue both sides of the tax debate – should we raise taxes on those earning more than $250,000 per year? Don’t they already pay enough? Shouldn’t the people who get most of the benefits pay additional taxes? All of this is really beside the point.

My questions are these:

Could it be true that a family earning $250,000 per year is earning just enough to barely get by?

Of course, location matters. But should we feel sorry for someone living in a high cost of living area because they can barely make ends meet on $250,000 per year?

Is a family that is saving $41,000 per year (16.4% of $250k) really struggling all that much?

After looking at the budget presented in the article, what stands out to you? (Hint – I can see thousands of dollars that this hypothetical family is wasting, or simply categories of spending that astronomical to me)

Articles such as these that support an extreme point of view in order to further a political point really rub me the wrong way. Do they think Americans are dumb enough to actually read this garbage and believe it? Don’t answer that. I guess what I am trying to say is that if you can’t find a way to make it somewhat comfortably on $250,000 per year, then it probably won’t matter how much money you make – you simply don’t have the skills needed to manage your money properly.

I’m certainly not saying that raising taxes on families making over $250k per year is the answer to the budgetary problems we are currently facing. But come on, don’t try to make me feel sorry for them by telling me that they are barely able to get by on $250,000 per year. Give me a break.

A little over 2 months ago, I detailed the decision process I was going through in Choosing My Next Real Estate Investment. Not too long after writing that article, my investing partner and I found a pretty solid deal on a single family home in a new neighborhood about half a mile from my house.

The house was built approximately 18 months ago, and the owners lived in the house for about 6 months before they just stopped making their payments. They were the first owners of the house, and when they built the home, they simply did way too many upgrades to the house, and wound up overpaying for the neighborhood.

The original owners of the house paid $153,900 for a house in a neighborhood of houses costing $130,000 to $145,000. Not a good situation at all, and for whatever reason, the house quickly became unaffordable and they decided to attempt a short sale. Since that time, here is a timeline of events leading up to my partner and I becoming involved with the property:

• The current owners talked with their lender in mid 2010 about pursuing a short sale – they got approval to pursue, but did not get any feedback on exactly what price the bank would approve a sale of the property (and a loss on the mortgage).
• Started out pricing the house at market price – mid $140′s
• Due to competition with new construction as well as declining market conditions within the neighborhood, they gradually dropped the price all the way down to $125,000 by early 2011. At this point, this property hit my radar screen.
• After brief negotiation, my partner and I got a contract to purchase the property for $120,000, pending approval by the lender (Bank of America).
• After about 2 months of hearing nothing from Bank of America, we were finally alerted that they would be sending an appraiser out to value the house.
• After 2 more weeks, we were told by the realtor handling the sale that the house appraised for $144,000 and that Bank of America would accept no less than $138,000 in a short sale (this represents some percentage of the mortgage balance owed which B of A would like to recover).

Firstly, the appraiser is smoking something. Just a couple months ago, a house with the exact same floor plan sold for $133,000 – this house was about 3 doors down from the house we were trying to buy. I have no idea how the appraiser came up with an appraised value of $144,000.

Secondly, Bank of America is smoking something, too. They are relying on an appraiser who has no idea what he is doing, and in the process have scared off the only potential buyer for the property. At this point, they have essentially forced themselves into foreclosing on the house. I know from research that they are owed approximately $149,000 on the house, so no matter what, they are going to lose money on this deal. But with the house being on the market for several months at $125,000 with only one offer (ours), what makes them think they’ll be better off foreclosing on the property, paying a multitude of legal fees, etc. Not to mention it will likely take them another 6-12 months to work through the process, all the while they’ll have a non-earning asset on their books (I am sure they have thousands of similar cases).

This brings about a very important financial lesson that both you and I can apply to our personal finances.

Know When to Cut Your Losses

The mistake that Bank of America is making in this case is that they are basing their decision of an acceptable short sale price on a past decision. They loaned $149,000 on the house, and now their exit strategy is dependent upon getting a certain percentage of that money back in a short sale.

In reality, the loan decision and now the recovery efforts should be 2 completely separate decision making processes.

The first decision was to make a $149,000 loan against this property. Based upon the original purchase price of the property, this at least appears to be a rational decision. Obviously, I say this without having any knowledge, but I assume that Bank of America knew what they were doing when they made the loan (this may appear to be a huge assumption).

Now that the loan has gone bad, the second decision making process should be determining the best course of action to recover as much money as possible. This decision making process should have absolutely nothing to do with the first. So they’re owed $149,000 – so what? That doesn’t really matter now if the best case scenario is to recover maybe $115,000. Approving a short sale only if it meets some arbitrary percentage of the current loan balance is ignorant.

As irrational as this may sound, many of us do similar things every day when it comes to our personal finances. Don’t believe me? Look at these examples:

• We avoid paying off our mortgage early because we need the tax deduction. Pay $1 in interest to save 25 to 35 cents in taxes – huh? Have I got a deal for you…
• We hold on to an investment that continues to decrease in value because if we sell today, we must admit it was a bad investment and recognize a loss. It doesn’t matter what price you paid. It only matters if you can get more money by selling today, or waiting until later to sell.
• When we go to sell our house, we base our asking price upon what we paid for the house, not upon current market conditions. No one wants to sell their house for less than they paid, even if selling today will ultimately be much better than waiting several more months or years.

Bank of America was kind enough to provide a valuable lesson, and we’d all be wise to learn from it (unfortunately, B of A always seems to teach us what not to do, but I guess someone has to set a bad example). Next time you find yourself in the midst of making a financial decision, base the decision on the realities and market conditions of today. What you paid for something, or what the item was worth to you in the past has absolutely no bearing on the value today – so just forget about it. Each decision requires analysis of the most current data available. Nothing else really matters.

Readers:

In what other financial decisions do people frequently rely upon old data, and fail to consider current market conditions?

Do you ever find yourself thinking too much about sunk costs instead of analyzing the future potential value of a particular financial decision?

I’m a big believer in paying people in proportion to their contributions and level of performance. In many instances, however, people within an organization are directly active in generating revenues for the company. Valuing the bottom line contributions of salespeople, for instance, it often easy to do. Their sales volumes for the year can be tracked. Good cost accounting data can be used to determine the profit generated from the sale of each product line. In the most straightforward of compensation systems, the salesperson is paid a specific percentage commission or set dollar amount on each sale. Pretty easy to comprehend.

But what about the salesperson’s administrative assistant, the staff accountant who books the revenues and associated expenses, or the person in human resources who hired the salesperson? These folks all contribute to the success of the organization, each in a different way. However, their contributions indirectly impact the bottom line and are therefore more difficult to place an exact value on. So all of these people are paid salaries, which determined by applying some sort of industry average adjusted for locale and years of experience. Although this method of compensation is again easy to understand, it is more subjective than a commission style compensation arrangement, and therefore more prone to discrepancies.

How then do we value the contributions of those at the very top of the corporate hierarchy?

Very few CEO’s are active at a level in their companies where we can directly value their contributions. They are not on the streets or on the phones selling product. Most of their time is spent making higher level decisions for the strategic direction of the company. What acquisition should be pursued? What departments should have staff cut, and what departments should have staff added? Although they set the course of action for their company, the strategies are executed by everyone else.

So again we see that we have another position within most companies that has contributions that must be valued more indirectly. Again, we must defer to some market rate of compensation to determine what a CEO is worth. Based upon the market for CEO compensation in 2010, if you are charged with determining the compensation for a CEO at a top company, you’d better come up with a number in the range of $30 to $90 million. Based upon data available online, the top 5 highest paid CEO’s in 2010 were:

1. Gregory Maffei – Liberty Media – $87.1 million

2. Oracle – Larry Ellison – $68.6 million

3. Occidental Petroleum – Ray Irani – $52.2 million

4. Yahoo – Carol Bartz – $44.6 million

5. CBS – Leslie Moonves – $37.6 million

*Note – All compensation numbers include cash compensation, stock based compensation, and other compensation (such as personal use of company aircraft).

Over the past 10 years, the ratio of CEO to compensation to that of the average corporate worker has ranged from approximately 250 times to 525 times. With approximately 260 work days in any given year, that means at most large companies, the CEO earns in one day what the average worker earns in a year.

So what does all this mean?

I honestly have no idea. We see articles in the media all the time talking about a growing outrage over CEO compensation. I can’t ever recall feeling outraged, but I often recall being dumbfounded just hearing the numbers. What are these people really doing to warrant earning this type of money each year? I say this out of curiosity, not out of accusation.

Questions for the day?

Is is justifiable for anyone to earn $87.1 million per year?

Does hearing compensation numbers like this make you outraged, or encouraged about the possibilities for your earning power?

Are the contributions of CEOs really 250 to 525 times more valuable than the average worker?

How often do you have a really big idea for something you want to do?

Now, how often do you actually follow through with it?

If you’re like me, the answer to the the first question is, “all the time”. And the answer to the second question is, “hardly ever”.

I often wonder why I seem to have so many good, big ideas (at least they seem good to me), but rarely have the ability to actually pursue them. Take this blog for instance. I thought about making it a reality for most of 5 years before I finally pulled the trigger earlier this year.

I have good ideas all the time at work for ways we could improve processes, save time, make a certain employee more productive, etc. I rarely voice these ideas to my superiors. Is it because I am not confident in the idea? I don’t think so. Is it because I am afraid it might create more work for me to implement my proposed ideas? It could be.

I think we all have to fight a natural tendency to be lazy. Perhaps lazy is not the correct terminology here. What I am trying to say is that it takes a great deal of mental strength for us to voluntarily put ourselves in a situation that gets us out of our normal routine, or our comfort zone.

You’ve probably always heard that humans are creatures of habit. We get up at the same time every day. We typically stick to the same routine each morning. For me it is shower, eat breakfast, catch up on some blogs, get dressed, go to work. I rarely (never) break this morning routine during the week. In general, within a broad array of duties, my work days tend to follow specific patterns as well. And for the most part, my routine in the evenings is very similar also. But, should we really believe the old saying and assume that being a “creature of habit” is the best thing for us?

When I think about some of my favorite days from the past couple weeks (that is as far back as I can remember), they have certain things in common. Surprisingly, my most favorite days were the ones that got me out of my normal routine the most. Here’s a couple examples:

• A few weeks back I spent the better part of a day taking a road trip with a prospect from work who was looking to make an asset acquisition. He spent the day driving me around to different locations looking at the assets he was wanting to purchase. We spent time discussing his business in detail.
• Just last evening, we had some rather ominous thunderstorms roll through the area just around the time I got home from work. This made for an exciting hour or so right after work where I spent time outside watching the skies, wondering if I’d be blown away (I’m still here and in one piece).
• Some of my favorite days at work are when we have meetings scheduled that are out of the norm. Perhaps we are all getting together to analyze a certain process, or talk about high level goals for the year. Routine meetings get boring, but these higher level, un-routine meetings are really fun to me.

For someone who is supposed to be a “creature of habit”, I sure do seem to thrive on having my routine shaken up. I’ve even reached the point of actively trying to fit things into my day that are way out of my normal routine, and therefore out of my typical comfort zone. I work hard at scheduling meetings with people whom I really don’t know, but who are good prospects for me at work. I actively strike up conversations with people on the elevator or in line at a restaurant, and I make it a point to talk about something other than the weather or the fact that it’s Friday, or almost Friday (this routine, worthless conversation really drives me nuts).

Scaling Up

Since around the time I was graduating from college, and over the 4 years since that time, I’ve often wondered if I limited the opportunities and experiences I will have in my life because of my unwillingness to get outside of my larger comfort zone. When I say larger comfort zone, here is what I mean:

• I still live in the same state where I was born, and where I have lived for my entire life. Most all of my family still lives here.
• I work for someone else as an employee, at a normal 8-5 job. I work in a very traditional career field.
• I live in a house in the suburbs with my wife, we drive normal vehicles, we have a dog, etc.

Essentially, my comfort zone has always been to turn myself into my idea of the “all american male” – always living up to what everyone expects from me.

I often wonder what my life might be like if I had the willingness to move across the country to Florida, New York City, San Francisco, etc. What if moved to a hole in the wall apartment, and took a low level job that let me just get by, but that I didn’t have to work very hard at? What if I just quit my day job, and jumped into the deep end working for myself?

Perhaps it’s just my nature as a fairly conservative person to always have a solid plan in place (with multiple backup plans, of course). But I often wonder if I might be better off putting my conservative nature aside and just letting life take me wherever.

I do know that doing this on a very small scale has brought some excitement to my life. For example, as a banker working primarily with businesses, almost all the leads I get come from referrals from existing customers or from other people I know. Commercial banking is not the type of career where you just start knocking on doors trying to sell money. But, I have to admit, some of the most exciting days in my career – both good and bad – happened doing exactly this. I’ve walked into businesses and been turned away immediately. But I’ve also walked into businesses and made a friend for life with the owner following a 2 hour conversation.

To me, the moral of the story is, you just never know what will be behind the next door you open, or around the next corner. The hard part is knowing which doors to attempt to open, then convincing yourself to actually do it.

New Perspective

A way I have been able to convince myself to do more things outside of my comfort zone here lately is to tell myself one or both of the following:

• What’s the worst that could happen. Most times, what I am trying to talk myself into doing won’t kill me, or harm my reputation. Why not go for it?
• 100 years from now, I’ll be dead and this really won’t matter. Why not go for it? It sounds morbid, but a lot of times I’ll get a ton of confidence from telling myself this. It always brings a big smile to my face.

Sometimes I am able to convince myself to do things our of my comfort zone, and a lot of times I fail. But I am actively trying to expand my horizon of opportunities. I am still a work in progress.

Readers –

In your day to day life, do you prefer to stick to a routine, or do you enjoy just seeing where the day will take you?

Are there big things that you would like to do in life that you have a hard time convincing yourself to try?

What are some strategies you use to get yourself out of your comfort zone?

In the extremely scientific poll I conducted last week, I asked my readers how much money they currently earn, as well as how much money they would like to earn. Throughout the process of reading the various responses, I was absolutely shocked to learn that all the responders had one thing in common:

They all wanted to earn more money than they currently do.

OK, so I wasn’t really shocked. Quite frankly, when I posed this question last week, I knew almost exactly the type of responses I would receive. The reason I even bothered to ask the question was that I wanted documented proof for some of the things I am about to tell you today.

You will never be satisfied with your income

Never is a pretty strong word. In reality, the top 0.1% of income earners around the world might actually be satisfied with their income. But unless you are Bill Gates, Carlos Slim, or someone else similar (richest people in the world), someone is always doing better than you are. There is always another rung on the ladder to be climbed. Consider the following facts about my income:

• 4 years ago I was a college student earning maybe $1,000 each semester from part time work, and $5,000 each summer if I was lucky. I probably never earned more than $7,000 in any one year throughout the time I was going to college. I could not wait to get out into the “real world” and start earning real money.
• My first “real” job out of college paid $40k per year. I remember getting offer letters from about 4 different companies when I was interviewing as a college senior. All the offers were pretty similar when it came to compensation. I just remembered thinking that I was going to be rolling in money as soon as I began my new job. This feeling lasted for about 3 months. By that time I learned that many of the people I was working with on a daily basis were earning anywhere from 150% to 2,000% of my current income level. I remember thinking that I couldn’t wait to gain more experience so that I could start moving up and earning more (starting to see a pattern here?).
• About 4 years into my career, I am now earning a little over twice what I was earning when I started out. When I reached this number, I felt elated for several months, but now, my new higher level of income is the new normal for me. Now I have a job with more responsibility, and I work with some of the most successful people in my city. Needless to say, my reference point has once again been escalated, and again I realize that there is much more potential for what my income could be compared to what it is today.

Now, let’s look at some of the current/desired income numbers you the readers provided last week:

• Current incomes ranged from $7,500 for a 4 month stint as an intern, up to $100,000 for what I assume is a full time position.
• Desired income levels ranged from $50,000 (current income for this person was just slightly less than $50k) all the way up to $500,000 (current income level was $100k in this case.
• In all cases, desired level of income was higher than current level of income (sometimes only slightly higher, but in most cases, much higher).

It’s safe to say that of the people who interact on this blog, the majority of us (including myself) have not yet reached the point of income satisfaction (and it is unlikely that we ever will). The perfect level of income always seems to be a moving target. There is always someone that we know who is earning more than us. There is always something else that we need or want. The savings account or retirement account could always stand to be just a little bit larger.

So what do we do?

The biggest problem I see with income satisfaction being so elusive is this:

If you are constantly thinking about achieving a higher level of income, you’ll spend the majority of your time working toward a goal that will never be reached (because it is a moving target) and you’ll be less satisfied with what you have today.

Let’s face it, if you’re the type of person who is reading Back Nine Finance on a Wednesday in April, then you are probably more focused on earning and income than the majority of people in the world – nobody winds up here by accident!

But if we all want to earn more, and we know it’s highly unlikely we’ll ever reach the point of income satisfaction, then how do we use this knowledge? Simple, really:

• Admit that earning more won’t really make you any happier. Think back to the last time your income increased. Once this initial feeling of euphoria wore off (in a few days, weeks or months depending on the size of the increase), things felt “normal” again pretty quickly. You might have a few nicer toys around you, be living in a nicer neighborhood, driving a fancier car, etc.  But it likely didn’t take long for you to have another higher income goal in mind, and start pushing toward it.
• Understand that if your basic needs are met (along with a few wants), then you have it made. If you have acceptable levels of food, clothing and shelter, and at the same time can save some amount for your future, enjoy some hobbies and splurges today, then any increase in income won’t really increase your quality of life that much. Any gains beyond this basic standard of living will only be marginally beneficial to your level of happiness. It always seems like pursuing some big goal in life, such as a brand new car or a nicer house will drastically change your life. But as least for me, 3-6 months down the line, I’ve settled comfortably into my new normal, and I’m on to the next big thing.

Conclusion

If at times it seems like you will never arrive at your destination (whatever it is you are wanting out of life), consider this:

Perhaps you have already arrived.

We are living in amazing times:

• Within 15 minutes, I could get into my car and drive to enjoy virtually any type of food I can imagine.
• Via the internet, I can communicate and interact with people from all over the world, almost instantaneously.
• We actually have daily discussions about how we’ll save enough money for a retirement that might be 30 years or more away instead of daily discussions about how we’ll feed ourselves or the kids.

I’m not saying that you shouldn’t strive to earn more money and increase your standard of living, savings, etc. But the issue with this mentality is that it forces you to focus on the future to the detriment of today. If you’ll stop and take a look around, you might realize that you’ve reached a pretty good place already. I’d hate for you (and me) to miss out on the blessings of today because we are caught up in wanting more for tomorrow.

What do you think – is it possible to reach the point where you are totally satisfied with your income?

Do you ever find yourself wanting more income without a clear reason why?

In case you happened to be visiting another planet for the past 4 days, or if you’re just not the type to keep up with big golf events, the 2011 Masters tournament was completed yesterday afternoon. Always one to think deeply about every situation ( ), I wanted to discuss some life lessons that can be learned from this year’s tournament…

1. Results get Remembered – I feel bad for Rory McIlroy. After 54 holes (3 rounds) of the tournament, he had a 4 stroke lead and looked dominant. He seemed to be having fun, looked very comfortable – all appeared to be in order. But, when it came time to seal the deal on Sunday, his game seemed to vanish. Short putts suddenly became nearly impossible to make. Fairways were elusive. After reaching 12 under par through the first 3 days, Rory shot an 8 over 80 on the final day, finishing well back in the pack.

Sadly for Rory, several years from now, when the 2011 Masters is discussed, he’ll rarely be talked about. People will talk about the winner – Charl Schwartzel (who?).

The same can apply to all of our daily lives, and our financial endeavors. For whatever reason, we live in a results driven society. Giving good effort usually isn’t good enough. We have to give good effort, and also get good results. Keep this in mind the next time you are tackling a big project at work. Sure, it feels great to give solid effort when working toward a goal. But the only thing your boss will remember come annual review time is the results you were able to achieve.

2. You Cannot Rely Solely on Your Reputation – In years past, essentially any person that was unlucky enough to find them self on a leader board along with Tiger Woods would immediately be vaporized, never to be heard from again. If Tiger Woods was in contention to win a golf tournament come Sunday, he rarely lost. No one seemed seemed to be able to put up a fight.

When Tiger began making a charge early in the 4th round of this years Masters, he looked like the Tiger of old. The funny thing was, the other competitors didn’t really feel like playing along. As strong as Tiger’s charge was, there were several other golfers who made strong charges of their own in an attempt to fill the top spot on the leader board that was quickly being vacated by Rory McIlroy.

In years past, Tiger was able to perform to a level that backed up his reputation. Performance led to reputation. Reputation then led to performance (because his reputation alone scared everyone else off, lessening the need for stellar performance). The problem with relying solely on your reputation is that if you don’t continue to support it with strong performance, it will quickly fade away. My advice is to continue to focus on delivering performance, and let the reputation take care of itself. Don’t rely on your reputation to the point that you become lazy.

3. Arrive at the Finish Line No Matter What – Most golfers teeing off on Sunday probably thought it was an extreme long shot for them to win the tournament, with the sole leader of the tournament holding a 4 shot lead, and seemingly playing so well. But the thing that golfers understand that the rest of us would be very wise to incorporate into our daily lives is this – golfers realize that train wrecks will happen eventually, and those that benefit are the ones who just kept chugging along, even when it seems like they are out of it.

Perhaps in your current job you’re not motivated to work hard because there are seemingly too many people ahead of you for you to ever get that promotion. But just remember, somebody will do something stupid or crazy. Or something major will happen that will eliminate several of those ahead of you (maybe they’ll all leave for another company). If you just keep your head down and keep delivering good performances (see above), eventually the train wreck will occur and you’ll be there to fill the void. Not to say that you should wish misfortune upon others. But let’s face it, in golf as in life, there is always plenty of misfortune. There are winners and losers in many situations. That’s just the way it is.

4. Look Around and Enjoy the Ride – Perhaps the best advice to be taken away from the 2011 edition of the Masters can best be summed up by a story. Rickie Fowler, 2nd year PGA Tour player shared the following story upon completing his 2nd round on Friday (I paraphrase):

I was talking to Jason Day on the 18th green right before he hit his putt. I was like, man, just look around. This is pretty cool.

Granted, the career of a PGA Tour golfer is much cooler than mine, but that is advice is something we could all put to use often. Life seems to be getting faster paced all the time. Even our leisure time gets rushed (I like to try and play an 18 hole round of golf in under 3 hours). I made a conscious effort the past 2 days to take at least a few moments to slow down, take in my surroundings, and appreciate the life I am living. It’s seems simple, but if you just give it a try, you can almost feel your mind being pulled in 15 different directions. Learn to take at least a couple moment’s each day to pause and be thankful for where you are, what you are doing, and what you have. It’ll be refreshing.

As a follow up to the question I asked on Wednesday (How much do you want to earn per year?), I’d like to ask a similar question today:

What do you consider to be a livable amount of income for another person? To rephrase, I’d ask what number you’d use to fill in this blank:

A person ought to be able to live on $(blank) income per year.

Yesterday, I talked about my revised posting schedule here at Back Nine Finance. The information that I have been gathering from all of you this week is going to help me with a post I am working on for next week. Although my pace of posting will be slowing a bit, I am working on stepping up the quality of material. I want to continue to talk about topics that are interesting to people whose finances are a bit more advanced.

Thanks for hanging with me this week while I catch my breath a bit. I appreciate it.

See you all bright and early Monday morning. Be prepared for a lively discussion!

Please help me out with an answer to this question:

A person ought to be able to live on $(blank) income per year. (fill in the blank)

Just a quick heads up that I am going to begin a new posting schedule here at Back Nine Finance. I’ve been posting 5 times per week for the last several weeks, which with my current schedule at my “day job”, the spring golf season (favorite time of the year), and also pursuing numerous other things currently is just too much, to be quite honest.

Keeping that in mind, I am going to cut back to 3 posts per week (Monday, Wednesday & Friday), with hopefully a monthly “round up” style post where I can share some of my favorite articles from around the web.

Despite the reduced quantity of content, my plan is to strive to increase the quality of the material, and also continue to cover topics that are rarely covered on other personal finance blogs. We’ll still generally avoid run of the mill money saving conversations here at BNF. As always, the focus will be on earning more, alternative investment ideas, and ways to live a richer life.

I appreciate all my readers, and I hope you bear with me as I continue to tweak the content and schedule of this blog to something that I can sustain for the long haul.

Carnivals for this Week

Back Nine Finance was honored to be included in 2 blog carnivals this week.

My post titled New Ratios for House Buying was included in the Carnival of Personal Finance hosted over at Funny about Money. Also, my guest post about my challenges with entrepreneurship that was posted over at Budgeting in the Fun Stuff was also included in the carnival.

Secondly, the post where I described a Day in the Life of a Commercial Lender was included in the Totally Money Blog Carnival which was hosted this week by the Saved Quarter.

See you all tomorrow.

- Bogey