Archives For December 2011

Have you ever wondered what the timeline of an entrepreneur actually looks like?

As I discussed with Mobestream Media CEO, Chris Fagan, many people never see the multiple failures and the years of work that goes into becoming a successful entrepreneur. Instead, we mostly assume someone got lucky and their success came overnight.

Is there a typical path to become an entrepreneur? Everyone’s path is a little different, but based on my conversations with other entrepreneurs, there is a general timeline of an entrepreneur:

1. You believe in yourself

2. You’re uncomfortable in your current situation and feel you can do more

3. You have a good idea you think will work

4. You get busy with work and set the good idea aside

5. You’re uncomfortable in your current situation and feel you can do more

6. You have a good idea you think will work

7. You put your idea on paper and think about a business plan

8. You talk to some people and doubt your good idea

9. You get busy with work and set the good idea aside

10. You get pissed at yourself because five years have gone by and you still haven’t done anything

11. You get more realistic on your good idea because you realize you don’t have $2 million to invest into it

12. You start to work weekends on your idea

13. You start to believe in your idea

14. You start to work nights on your idea

15. You finally make a few dollars on your idea

16. You get really swamped with work and start to realize you’d rather work on your idea full time

17. You realize you need money from your day job still

18. You are so busy you can’t even sit down

19. You feel like your life is going to come crashing down

20. You make a little bit more money on your idea and people start to believe in you

21. You think you can work full time on your idea and quit work

22. You feel like your life is going to come crashing down

23. You make the big plunge and go full time on your idea

24. You’re broke and don’t know how you’re going to feed yourself next week

25. You find some food in the cabinet, but you still don’t know how you’ll feed yourself in three months!

26. You feel like your life is going to come crashing down

27. You make a little bit more money on your idea

28. You realize you have multiple competitors and some are pretty far ahead of you

29. You work non-stop on your idea

30. Your relationships are affected and you realize who the people are that will stick with you no matter what

31. Your idea starts to pick up more steam, and you start making money

32. People start to see you as a successful entrepreneur

33. Customers love your idea

34. Everyone thinks you got lucky overnight and are amazed you built something so great

35. People start chasing your success and some (person) moves in with you because they think you’re their meal ticket. (this is a very specific example from one person… hopefully not true for you!!)

Wow, did you actually make it through the whole thing?! This was your first test to see if you can be a successful entrepreneur… those who quit won’t have the perseverance to make their own business last!

Notice how steps 1-31 all begin with “you” or “your”. If you want to be a successful entrepreneur, you’re going to have to believe in yourself even if no one else does. You are going to have to work your butt off and make happen.

Are you ready to make this happen? Just so you know, I’m probably on step 15… I have a long way to go! Will you succeed through your own timeline of an entrepreneur?

 

Gambling is addicting. We all have our vices in life. We fall victim to scams, trust others when we shouldn’t, hurt the one’s we love, and then refuse to forgive ourselves for the damage done. What Andrew Carnegie said goes in both directions, “When I lay down at night I was going to get the verdict of approval from the highest of all tribunals, the judge within.” The judge within knows right and wrong and is usually harder on us than anyone else.

I went to high school with Jason, and he recently reached out to me to tell his story because he wanted to help others.

Jason’s ambition has continually pushed him towards further success in life. He didn’t go to college after graduating high school, but he did start his own business. His new found cash flow enticed him to yearn for more. This is when Jason met his vice.

Jason’s vice was innocent when compared to some of the harder vices in life. He didn’t do drugs, he didn’t drink his troubles away, and he stayed away from other illegal activities. His vice can actually be perceived as innocent if only looking at the end goals. He got involved in gambling because he wanted to grow his money faster.

Gambling is a very difficult addiction. It’s purposefully set up to give you little wins so you keep your hope alive. However, all gambling is tilted in favor of the house, and in the long run the house will win. I got caught up in my own form of gambling when I was day-trading so I definitely know how it feels.

Your mind races with the thoughts of doubling your money… doubling it again… and soon taking home thousands. It races with those thoughts because it knows it’s possible, and for people that gamble enough, they’ve probably experienced it themselves. You’ll always hear about the big wins gamblers experiences, but you won’t often hear of the losses.

Enough of the commentary, let’s get to Jason’s story as told by him.

Looking back, I wished I tried harder so I could of gone to college, but I didn’t so I had to make the best of it. I started my own home repair company and did well, but I started going to the casinos, and it really got a hold of me. I never tried drugs or anything. Gambling was my only vice in life.

I was going nowhere until I found out my wife was pregnant, and I knew I had to put a stop to it. I quit for about 9 months, but then I started going again every once in a while.

My business went down the drain because I was spending all of my time at the casino. Looking back, it’s crazy how it started. On my 21st birthday, a couple of buddies took me to the casino. I started by spending $20 at a time until one day I won about $500 and that was all it took. I was making gambling my job, and I was there everyday from 8am to 4pm except when I left to go to the bank.

I would lie to my ex wife and tell her I was going to work at night or to Wal-Mart and then go to the casino instead. Keep the word “Ex” in mind because on Dec 28, 2006 I walked into the casino with 40 bucks, and I walked out with $22,000. She left me seven days later and took it all. I don’t blame her because I would spend her paychecks before she even got off work on Friday.

So I had to start over and tried everything to find a good job. I looked for the highest paying jobs in my area. It took about six months to find my new job, and I started out around $30/hr. Man, that was great… but then they closed the mill. I was devastated, and I somewhat gave up thinking I would ever find another job that paid that well.

However, I knew I would have to keep trying. I looked for over 1.5 years until I finally succeeded again and found a job that topped out at $39/hr. There was only one problem with this; making good money again led me to gambling all over again.

There was only one way for me to stop the habit which I knew I had to do for my family. I had to put all my faith in God that his strength could keep me from going. So far so good. I had to get excited about saving money; just as excited as I was about gambling. I’ve made saving money my new goal and it has worked so far.

Jason’s fight with gambling isn’t uncommon, but that doesn’t make it any harder to stop. The best thing he’s doing is getting exciting about taking control of his money so his family will be better off in the future. As Trent explains in one of my favorite blogs, The Simple Dollar, one of the best ways he developed self control and perseverance is by making a “conscious choice to regularly think about my future self.” It’s even more powerful when you think about your future family and how they’ll be better off when you’re under control.

Jason is now giving back and helping others. He started an outdoor program called TK Outdoors (Taking Kids Outdoors) where they take kids without a father figure hunting and film their hunts.

Jason was able to acknowledge his vice which enabled him to deal with it. Some people have a breaking point such as Jason, but others won’t confront their addiction until it’s too late and they take everyone around them down. Which one are you?

Thanks to Percy for suggesting I should write an article on what to do with a Christmas bonus… it gave me a perfect opportunity to use a National Lampoon’s Christmas Vacation clip!

Unfortunately, most people have had a Christmas bonus similar to Clark’s this year. It seems most Christmas bonuses have gone the way of the dodo. Just in case you got one, check out my five serious and my five not so serious ways to spend it. Also, I’ve added some awesome Christmas clips below that.

Five (serious) things to do with a Christmas bonus:

1. Pay off credit card debt

2. Start an emergency fund

3. Give to charity

4. Do something nice for someone (pay someone’s grocery bill, restaurant check, etc)

5. Start a Roth IRA

 

Five (not serious) things to do with a Christmas bonus:

1. Buy all of the $2 movies at Target (ok, this was very tempting)

2. Use as a down payment on your new Lexus present

3. Buy the pet monkey you’ve always wanted

4. Loan it to a family member at a high interest rate

5. Day trade!

 

Not sure how I found this one… but hopefully you don’t have to resort to this!

I want to thank Lexus for reminding us of the true magic of Christmas. It’s not so much about the celebration of our families, the reflection on our religion, or the reminder of the beauty of life as seen through the eyes of a child.

No, it’s more about impressing someone with a brand new car. If you have the money to do it, then great for you. However, most of us shouldn’t be purchasing new cars for each other, especially if it comes with payments. You already know how I feel about car payments.

Want to know what would happen if I walked out to find a new Lexus in my driveway on Christmas morning? I would imagine it would go something like this:

Me: “Oh wow, who got a new Lexus?”

Wife: “You’re the best husband any girl could ever wish for… I bought it for you.”

Me: “Haha. No seriously, did you let the neighbors park it in our driveway.”

Wife: “You’re just so awesome, and you don’t deserve to drive around in a ten year old Volvo.”

Me: “I realize I’m awesome.”

Wife: “I wasn’t serious about the awesome part; but seriously, your Volvo sucks. The turn signals don’t even work.”

Me: “Hmm. I’m not sure how to take that.”

Wife: “What’s wrong with you… I just bought you a new car, and you’re not happy.”

Me: “Oh, you actually bought it? I was hoping you stole it or won it as a prize. How are we going to pay for it?”

Wife: “You aren’t reacting like the guy reacted in the Lexus commercial. You suck.”

Me: “How are we supposed to take control of our money if we have car payments?”

Wife: “Did you really say Nurture the Money Tree?”

Do you know someone who received a new Lexus for Christmas, or is Lexus just reminding us that all of our non-Lexus gifts are crap?!

So, if you’re reading this, beautiful wife, sorry for dashing your dreams of a new Lexus for Christmas. But seriously, my wife is really awesome and wouldn’t ever entertain the idea of me buying her a new car for Christmas. Maybe someday when we’re rich babe :).

Check out a parody of the Lexus video below… it’s pretty funny, but it went in a different direction than I expected!

 

 

Peru – Machu Picchu

December 13, 2011 — Leave a comment
Machu Picchu in the fog

Machu Picchu in the fog

Overlooking the mountains on the other side of Machu Picchu

Overlooking the mountains on the other side of Machu Picchu

Machu Picchu

Machu Picchu in all of its glory

Venice, Italy Pictures

December 13, 2011 — Leave a comment
Welcome to Venice

Venice from Guidecca

Smiling Gargoyle in Venice

Smiling Gargoyle in Venice

Grand Canal in Venice

Grand Canal in Venice

St Mark's Basilica, Venice, Italy

St Mark’s Basilica in Venice

Avg Salary by Education Level

In the past, I’ve questioned whether college is worth it. It was mostly a subjective look at it, but now I’m going to review the numbers to try and validate my assumptions.

The US Bureau of Labor Statistics (BLS) compiled wages from the last five years to show salary averages by education type. At a high level, it’s clear higher education enables you to make a lot more money. However, what does it actually look like over the course of a life time?

First, let’s look at wage growth over the next 40 years. I’ll use a 3% wage growth just for comparison’s sake; some people will experience higher growth and some will experience lower. For workers with a Bachelor’s degree or higher, their salary would grow from $59,124 today to $187,247 in forty years. For workers with less than a high school diploma, their salary would go from $24,316 today to $77,010 in forty years.

Percentage growth is very deceptive because even though both groups of workers’ salaries are growing at 3%, the dollar amount between the two changes drastically. It’s easy to see how the middle class is disappearing when you compare these stats. They start at a gap of $34,308, and balloon to a gap of $110,237 after forty years.

Salary Growth by Education level

Next, we’ll look at total income earned over 40 years for each education demographic (adjusted at the same 3% wage growth). For workers with less than a high school diploma, their cumulative salaries equal $1.83 million. However, for workers with a Bachelor’s degree and higher, their cumulative salaries equal $4.45 million. That’s a difference of $2.6 million in wages over the forty year period.

Cumulative salary by education level

If you compare the cumulative salaries of high school graduates to college graduates, the divide narrows to $2 million. So that means a college degree is with $2 million more than a high school diploma, right? Well, it depends on how much you pay for your degree.

ALERT ALERT ALERT

Big stuff to follow… you won’t see this anywhere else…

If you assume $100,000 of debt to receive a college degree, it might be better just to borrow $100,000 and put the money in the stock market! Now, I still think it’s better to college, but this just an interesting experiment.

Initial investment: $100,000

Growth rate: 8%

Investment length: 40 years

Value after 40 years: $2,172,452

Remember before when I said the difference between a high school diploma and college degree was $2 million? Well, if you borrow $100,000 at the age of 20 at a low interest rate, and could guarantee an 8% return over the borrowed amount, and averaged the same cumulative wage as other high school grads, you could have just as much as a college grad in 40 years!!

No College degree

$100,000 Investment + high school salary

$2,454,462 (High school salary ) + $2,172,452 (investment return) = $4,626,914

College degree

$4,458,024 (Lifetime college salary)

The high school grad with a $100k investment wins!!! The next question would be who is more fulfilled, but I’ll save that for another time.

The experiment is very theoretical, but not too far out of the norm. There are some variables that have to be accounted for (such as borrowing the money at a low interest rate), but they’re possible. The point here is a college degree purchased fully with student loans may not be worth it. The average student loan debt was $23,000 in 2009, so it would only be the extreme debtors who might take this experiment serious.

This also reminds me of entrepreneur Peter Thiel who’s giving high school graduates $100,000 to bypass college and start a company. The whole point of this experiment is to question if a college degree is worth it.

As I discuss in an earlier post, there are many things we don’t learn from school. Even saying that, a college degree is still worth it for most young adults because they can make $2,000,000 more over their life time. However, if they’re going into deep debt to pursue it, I think they need to question if it’s really worth it. What do you think?

 

National Lampoons Christmas House

Ah yes, the most wonderful time of the year. Christmas and the holidays mean different things to everyone, but most people can agree it’s a great thing to celebrate. It brings us all together and forces us to get back into the spirit that we so looked forward to as kids.

However, Christmas has turned into something else for businesses. Mainly, it’s the time of the year when retailers make almost 40% of their annual sales.

it’s important to weigh the intentional commercialization of Christmas with the spirit of giving. I have to be careful to not let my lack of ‘getting into the spirit’ of buying crap get in the way of giving. I definitely love giving to my family and friends. I’m just in a battle against debt, and I don’t like how retailers use the spirit of the season to their advantage!

Anyway, enough of the rant… I believe in capitalism so I wouldn’t have the retailers do it any other way. The key is to control your spending and try your best to have a set amount.

 

What’s the best way to control your spending on Christmas?

1. Create a list of everyone you want to give presents to

2. Estimate how much you will spend on each person

3. Compare your estimate to how much money you have

4. Adjust list as necessary

5. Take your list with you when shopping and use it!

 

You shouldn’t buy Christmas presents that will take the next 6 months to pay for! This isn’t really giving… I’d hate to see the new bike you got for your youngest repo’d .

Another way to cut back is to not buy gifts for yourself! According to a recent article in the LA Times, “Self-gifting was also on the rise as 46% of Black Friday shoppers bought something for themselves, up from 35% last year, research firm NPD Group said.” One for my family, one for me!

According to the National Retail Federation (the other NRF), “Nearly six in 10 holiday shoppers (59.9%) say they plan to take advantage of retailers’ sales and discounts to make additional non-gift purchases for themselves and their families.” We find such great deals that we just can’t pass them up… even if they won’t end up under the tree.

The NRF study continues with, “The average person will spend approximately $130.43 during the holiday season to take advantage of sales and discounts on apparel, electronics, home goods and other items for themselves or a family member, up from $112.20 last year.”

 

How much does the ‘average person’ spend on Christmas presents?

The same NRF report says the average shopper will spend $704.18 on gifts, which is actually down from last year’s $718.98.

This is the average for one person, so if you look at a couple the average is a little over $1,400 per year. We spent over that last year… so I guess we’re above average. The chart below shows how the spending per person has fluctuated over the last seven years.

Avg Holiday Spending

How are you paying for Christmas?

Ideally, you have saved money every month from January through December and have the full amount needed for Christmas already saved up. That was our plan this year. As each month passed we put our leftover cash budget into an envelope. However, when we were in the middle of renovations, we broke from this habit and then stole some from the envelope!

Luckily we have money saved up we could use, but my wife gets paid every two weeks and December is one of the months she’ll get three paychecks, so we’ll mostly use her extra paycheck. We’ll try harder next year to not raid the Christmas fund.

You want the joyful parts of Christmas to remain after the holiday season (memories, time with family, etc), but don’t rack up a bunch of debt that sticks around well past winter!

How much do you spend on Christmas? Leave your comments below