Balance JunkieBook Reviews | Balance Junkie

The Power of Less: Book Review

Kim Petch — Thu, 26 Apr 2012 09:46:57 +0000

Our attention is one of our most important assets. What we focus or attention on becomes our reality. The projects we focus on are the projects that get completed.

~ Leo Babauta, The Power of Less

Multitasking seems to be all the rage these days in spite of the evidence that it doesn’t really help us get more done. Instead, it just leaves us exhausted. Studies show that humans really aren’t capable of doing more than one thing at a time. When it looks like someone is performing two tasks simultaneously, they are actually just shifting attention rapidly back and forth between the them.

We can actually increase our productivity by trying to do less. That’s the message of Leo Babauta’s 2009 book The Power of Less: The Fine Art of Limiting Yourself to the Essential . . . In Business and in Life. It’s about choosing focus over diffusion, and single tasking over multitasking. By organizing and spending our attention wisely, we can accomplish just about anything we set our mind to achieving.

Mr. Babauta offers a system for organizing your priorities and accomplishing them one at a time. With today’s always-on everything, staying focused is more challenging than ever. Here’s a sampling of some of the ideas offered in The Power of Less:

One Goal System: Focus on one main goal at a time. Break it into smaller tasks and focus on each of those one at a time until you reach your goal.
Set Up a Simple Projects List: This consists of your top 3 projects. Projects can be completed within 1-4 weeks, as opposed to the One Goal, which is a longer term proposition. You could choose the 3 projects from different areas of your life, like work, home and personal.
On Deck List: projects waiting until you’ve finished your 3 simple projects
Clearly Defined Outcomes: Make sure projects and goals have a one-sentence, written description of what it means to accomplish them.
Focus On Completion and Avoid Distractions: I don’t know about you, but I get distracted easily by kids, noise, email, social media and stuff that just happens unexpectedly during the day. I’ve learned to manage distractions better and give myself some concrete, but realistic deadlines. I also cut back the number of essential tasks I want to complete each day to make room for the important things that seem to pop up each day.
Choose 3 MITs (Most Important Tasks) to Accomplish Each Day: Try to accomplish these tasks first. That way, no matter what surprises come your way, at least you’ve moved some of your projects closer to completion.
Make Morning &/or Evening Relaxation Routine: Set aside at least some time each day and week to do things you enjoy, plan your goals and tasks, and just gain some perspective: no work allowed!
Declutter: When your physical environment is disorganized and messy, your mental state usually follows suit. Periodically cleaning up, assessing and reorganizing your goals and systems can give you a truly fresh start. Mr. Babauta goes into how to set up a simple but essential filing system and maintain a clean desk. I still have yet to master the latter.
Batch Processing: Rather than answering your email/text messages every time they ping, checking social media regularly or getting distracted by a compelling headline, Mr. Babauta recommends taking care of all of these tasks at predetermined intervals. That way, you can stay connected on your terms and still accomplish your tasks. We all have a lot of inboxes these days, and it’s important to realize that we can let them fill up a bit as long as we empty them regularly.
Slow Down: Shifting attention and rushing through everything often leads us to feel like we’re not accomplishing very much, and yet we’re somehow still exhausted at the end of every day. Take some time to relax. Take a walk. Read a book for pleasure. Listen to some music. Play with your kids. Do nothing. Even when you’re working, take your time. You’ll feel better and probably still get more done. Dialing back the frenzy can be as easy as reminding yourself to slow down.

I haven’t done justice to the system Mr. Babauta lays out. It’s far more integrated than the 10 simple points above and it’s well worth reading The Power of Less to find out more. It’s a relatively quick read, although I can’t promise you’ll be able to implement all of these ideas quickly.

There’s plenty of flexibility in the model presented in The Power of Less, so you can easily adapt it to fit the demands of your own life circumstances. I don’t use the exact system in the book, but I’ve certainly incorporated many of the principles I learned and I’m actively working on improving in many of these areas. Change isn’t always easy and old habits can be hard to break. The good news is that once you establish more productive new habits, those will be hard to break too.

Do you find it more difficult to single task than you used to? Do you think less can be more?

The Psychology of Wealth Book Review

Kim Petch — Thu, 15 Mar 2012 09:50:55 +0000

People who have a psychology of wealth challenge themselves to move beyond their comfort zone to pursue a goal or a dream. They write down goals. They plan. They visualize.

~ Charles Richards, The Psychology of Wealth

The Psychology of Wealth: Understand Your Relationship with Money and Achieve Prosperity is a new book by Charles Richards. It was born out of the author’s desire to understand why some people with a lot of money don’t feel wealthy, while others with comparatively little money feel quite fulfilled. How do we define wealth? Did something go awry in our collective psychology of wealth to spawn the 2008 financial crisis?

Although he is a practicing clinical psychologist and coach to numerous Fortune 100 senior executives, Dr. Richards took a somewhat unique approach to answering his questions about what a true psychology of wealth might look like. Rather than embarking on a rigourous academic study, he pooled together common traits he’s observed in dealing with wealthy people over the years. He conducted interviews with some of these people as well as with financial and economic experts.

The result is a book that paints a picture of the psychology of wealth, drawing on a series of anecdotal profiles of a wide variety of people who embody the psychology of wealth. These short stories, woven throughout the book, are often extremely inspiring – not just because of what these folks achieved, but because of how they achieved it.

I thought I might take a unique approach to this review as well. When I read a book, I usually take some notes and write out quotations that catch my attention. Below, you’ll find a list of some of the common characteristics of people who have achieved a psychology of wealth. These are individuals who have achieved a level of comfort with their financial life as well as with the overall quality of their lives – the two are intimately connected, as you’ll see. Rather than explain each characteristic, I’m going to share a series of quotes from the book that illustrate the trait.

Psychology of Wealth: Common Characteristics

The following list of quotations may include thoughts from Dr. Richards, or from some of the people he profiled in The Psychology of Wealth. He found that these characteristics seemed to surface again and again in the most successful people he has encountered in his work:

Determination

From Aristotle: “First, have a definite, clear, practical idea – a goal, an objective. Second, have the necessary means to achieve your ends – wisdom, money, material, and method. Third, Adjust all your means to that end.”
‘If you don’t know where you want to go – if you are unconscious of what you want – ending up “somewhere else” may be the inevitable result.’
“Success requires a conscious decision to do and be something more.”

Self-Esteem

An “effective way to build self-esteem is by raising our awareness of how we think and by making a conscious habit of replacing negative language with positive language when thinking and speaking about ourselves and others. Surrounding oneself with positive messages and with successful and happy people are powerful methods for increasing one’s sense of self-worth.”
Henry Ford: “[Everyone] should look for the single spark of individuality that makes him different from other folks and develop that for all he is worth. Society and schools may try to iron it out of him; their tendency is to put it all in the same mold, but I say don’t let that spark be lost; it is your only real claim to importance.”

Personal Responsibility

Tony Cupisz: “What you think is what you are, and what you believe is what you’re going to have.”
Darren Hardy: “Personal responsibility is a conscious choice . . . you make your choices and then your choices make you.”
Sardine sandwich story told by author Brian Tracy about “a construction worker who, on his lunch break, complains loudly and profusely about having a sardine sandwich. To the annoyance of his coworkers, he repeats his complaint about his sardine sandwich every day for the next few days. Finally, one of his coworkers leans over and suggests that he ask his wife to make him something else for lunch. The man replies, “Oh, I’m not married. I make my own lunches!” What are we griping about in our lives, but do little to change?
If we choose to take on debt, make sure we do it “consciously” rather than “unconsciously.” There’s an interesting comparison chart in the book that illustrates the difference.
J.C. Watts: “At some point I have to realize that I’m the common denominator in everything that happens to me.”

Risk-Taking

“We must be willing not only to accept responsibility but also t take a chance on ourselves in order to achieve our broader goals – particularly now.”
“What keeps us from realizing our personal dreams of fulfillment and success? . . . it’s primarily fear and inertia.”
Anais Nin: “Where people fail is that they wish to elect a state and remain in it.”

Dealing with Obstacles and Setbacks

Psychologist and holocaust survivor Victor Frankl: “meaning in life does not come from what happens to us, but from how we interpret what happens to us.”
Tony Cupisz: “Success is not going to come to you if you don’t fight for it. You can’t try something and say it doesn’t work just because it did not work yet. For me, it’s about never quitting.”

Giving: Prosperity Through Generosity

“When you are feeling down, do something kind for someone else. A kindness given is also a gift to yourself.”
“whatever you give with an open heart will naturally come back to you – not because you expect it, but because you don’t.”
Dennis Gardin: “It’s impossible to extend oneself from a place of purity and goodness to help another person without being helped in the process.”

Win a Free Copy of The Psychology of Wealth

I found this book to be inspirational. It presented many of the elements of personal finance in a new light for me. The stories were both touching and informative. This is a great read for anyone who’s interested in improving their life. I’ll leave you with one last quote: “it’s not the pursuit of wealth that brings value and meaning to life; it’s the pursuit of meaning and value that brings wealth.”

The publisher has generously offered to send a free copy of The Psychology of Wealth to one lucky reader. If you leave a comment on this review, you’ll be entered for a chance to win the book. The winner will be chosen by random number. Comments posted before 5 PM on Sunday, March 25, 2012 will be included in the draw. I’ll notify the winner via email on the 25th, but I won’t be posting it here on the site. Good luck to all!

The Richest Man in Babylon Book Review

Kim Petch — Mon, 27 Feb 2012 10:45:07 +0000

Our prosperity as a nation depends upon the personal financial prosperity of each of us as individuals.

~ George S. Clason

If you’re at all interested in personal finance, you’ve likely heard of a book entitled The Richest Man in Babylon. I’ve known about it for years now. I bought it almost 2 years ago. I think it cost about $7.50. I didn’t get around to reading it until this past December.

For those who aren’t familiar with the book, it’s certainly not a hot new manual on modern personal finance. On the contrary: the book was written by George S. Clason in the 1920s. It’s basically a series of parables about money management set in ancient Babylon.

Timeless Wisdom

What could a series of short stories about personal finance in ancient Babylon possibly have to teach us in the age of high frequency trading, credit default swaps and instant access to just about everything? As I read the book, I couldn’t help but feel like we’ve become a little too sophisticated for our own good. The simple lessons it contains and the basic, almost biblical language that convey them had a sort of calming, clarifying effect on me. (Note: in spite of the writing style, there’s no religious angle in this book – for those who might see that as a turn-off.)

In the wake of our rather sudden decision to change cities last year and the subsequent upheaval that went with it, I felt like I had lost control of our finances. Everything was on hold until the dust settled. Once it did, I was more than ready to get back to basics, and this book (along with Gail Vaz-Oxlade’s Never Too Late) helped me do it. I had a new plan in place by the beginning of 2012 and even entitled our 2012 budget spreadsheet The Babylon Budget because it incorporated all of the principles Clason espoused in this classic book.

7 Simple Rules of Money

There are plenty of simple ideas for acquiring enough wealth to live on in The Richest Man in Babylon, but Clason starts with 7 basic principles:

Start thy purse to fattening: save at least 10% of what you earn – no matter what.
Control thy expenditures: saving more means spending less – and it won’t hurt as much as you think.
Make thy gold multiply: invest your savings.
Guard thy treasure from loss: invest wisely and manage your risk.
Make of thy dwelling a profitable investment: own your home, but purchase wisely.
Insure a future income: make sure you save enough for retirement and to care for your family when your life comes to an end.
Increase thy ability to earn: improve your knowledge and skills consistently to increase your earning power.

How to Handle Debt

Of course, if you’re following the 7 Simple Rules, you probably won’t have much – if any – debt. But what if you’re a little late internalizing the 7 rules? Suppose you already have a significant amount of debt. Is there any way out?

According to the sages of Babylon, you still need to save 10% of your earnings for yourself. Another 20% of your income should go to pay down your debt. You will need to find a way to live on the remaining 70% of your earnings.

Over and over again, the 10% marker comes up as the standard for savings. Now for those of us who are getting a late start on saving for retirement, this may not be enough. But it’s a start.

Simple Gets You Started

If you’ve gotten off track financially, or maybe never quite got around to starting down the track, this book can help. There are no secrets of investing success, no trading rules, and no get rich quick schemes. You don’t have to be any good at math beyond a simple percentage calculation. If you can figure out how much 10% of your income amounts to, you’re good to go.

Of course, making sure you set that 10% aside may be easier said than done. What got me back on track was the utter simplicity of the idea. After all, if we couldn’t figure out a way to save at least 10% of our income, it seemed like we had much bigger problems.

When I sat down to craft our new Babylon Budget, I was ready to cut to the bone if necessary. It turned out it wasn’t. I was prepared for pain, but just shuffling some priorities around allowed us to hit (and even exceed) our target. More than that, the exercise of cleaning up our spending habits was cathartic. It felt like spring cleaning in December.

Now we’re focused on Rule #7: increasing our earning power. We’re not there yet, but we’re determined to reach our goal by keeping things simple rather than fretting over the potential complexities of personal finance.

Have you read The Richest Man in Babylon? What did you think?

Millionaire Teacher Book Review

Kim Petch — Tue, 07 Feb 2012 10:45:57 +0000

To stay out of harm’s way financially, we need to build assets, not debts. One of the surest ways to build wealth over a lifetime is to spend far less than you make and intelligently invest the difference. But too many people hurt their financial health by failing to differentiate between their “wants” and their “needs.”

~ Andrew Hallam, Millionaire Teacher

If you’re a novice investor wondering how to get started on the road to a worry-free retirement savings fund, I’ve got the perfect book for you. If you’re a seasoned personal finance aficionado, I think you’ll find this to be an excellent resource too. I’m talking about Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in Schoolby Andrew Hallam.

Andrew reached millionaire status before he turned 40 on a teacher’s salary. Did he win the lottery, pick some hot stocks or inherit a whack of money? None of the above. He just followed nine simple rules and has generously shared them with the rest of us in this book.

Rule #1

As with most potentially complicated endeavours in life, the means to growing your wealth can be boiled down to a few essential, timeless truths. While all of Andrew’s nine rules are wonderfully useful, if I had to boil them down further, I would choose Rule #1: Spend Like You Want to Grow Rich.

Many of us believe that we need to be really intelligent, or lucky, or both to accumulate wealth over our lifetime. The reality is that it’s not rocket science. If you can consistently spend less than you earn and wisely invest the difference, you’re well on your way to financial freedom.

Where most of us fall down (myself included) is getting caught up in the idea that we’ll save after we’ve paid for everything else. If we simply reverse that process, we can save a whole lot more. Instead of spending on things we “need” and saving what’s left, we can set aside our savings first and spend what’s left. And we can always look for ways to increase our savings and decrease our spending – within reason. (Don’t forget to budget in some fun!)

Favourite Themes

While there’s a lot of detailed, yet concise information in Millionaire Teacher, a few main threads seemed to run throughout the book:

Beware of mutual fund fees: these are often hidden in funds but can put a real crimp in your savings over time.
Car-buying tips: Andrew has some great ideas on how to keep your car from becoming a huge hole in your pocket.
Start saving early to unlock the magic of compound interest.
Don’t even think about investing until you’ve gotten rid of your consumer debt.
Buy a home you can afford even if interest rates double. (Hat tip to Andrew’s Mom on this one! )
Invest in low-cost index mutual funds or ETFs.
Rebalance your stock/bond allocation regularly.
Specific ideas on how to break up with your mutual fund salesman.
Where to find low-cost index mutual funds and ETFs whether you live in Canada, the U.S., Australia, or Singapore

Andrew advocates a passive investment approach where you simply invest a set percentage in stocks and bonds and rebalance when the asset allocation gets too far out of line. While I think this is a decent strategy for the average investor – and even for most sophisticated investors – longtime readers know that I have mixed feelings about devoting all of your savings to a purely passive strategy. I like to take into account secular market cycles as well as personal risk tolerance and valuations.

Believe it or not, Andrew even has an answer for those who still like to dabble in individual stock-picking. Rule #9 allows you to take 10% of your portfolio and invest it in a few individual stocks. If you’re right, you can kick your performance up a notch. If you’re not, you haven’t tanked your retirement plans. Not bad.

The Bottom Line

You can quibble with some of the fine details in Millionaire Teacher if you like, but the bottom line is that Andrew has produced a fantastic road map to wealth here. Whether you already know a little or a lot about personal finance and investing, this book is well worth your time – and it makes a great gift for those just starting out in life or investing.

As a bonus for those who aren’t avid readers – especially of financial texts – this book is tremendously readable. Andrew takes you by the hand through the investment industry maze, melding hard facts with amusing stories and he does it all in less than 200 pages. Before you know it, you’re finished.

You may or may not find your own pot of gold at the end of the maze. (Gold’s not such a great investment anyway, according to Andrew.) That will be entirely up to you. But you will be enlightened and hopefully, empowered to take your financial fate into your own hands and design a better future for yourself and your family.

Feel free to share your thoughts below!

Never Too Late: Book Review and Giveaway

Kim Petch — Mon, 24 Oct 2011 09:45:01 +0000

It’s about taking control of your future so that when you finally get there you’re not surprised at what it looks like. And it’s about making sure you know the truth and deal from a place of fact, not fear.

~ Gail Vaz-Oxlade

Planning for retirement can be confusing – so much so that many of us avoid it altogether. If you’re Canadian, you might be further confused by the fact that much of the information out there is directed at Americans. While the basic principles of retirement saving know no borders, there are significant differences in the types of retirement saving vehicles out there and their corresponding tax laws.

It goes without saying that avoidance is not a good retirement strategy. No worries. Gail Vaz-Oxlade’s latest book called Never Too Late: Take Control of Your Retirement and Your Futurecan help you set a course for retirement that works for you.

Win a Signed Copy of Never Too Late

Thanks to InsureCan, I can offer a signed copy of Never Too Late to one lucky reader. All you need to do is leave a comment on this post and I’ll enter you in a draw for the book. I’ll announce the winner on Friday, November 4th, 2011. Good luck to all!

10 Questions Never Too Late Can Help You Answer

Gail’s no-nonsense style is familiar to many Canadians and her voice comes through loud and clear in this book. One thing she makes clear from the beginning and repeats throughout the book is that “only you can take the steps to get from where you are now to where you want to be.” She provides lots of practical information in an easy to read, clear cut format. Here are just a few of those nagging retirement questions Gail addresses:

1. How much money do I need to save for retirement?

2. How can I save enough for retirement?

3. Should I save for retirement or my child’s education?

4. Should I pay down my debt/mortgage before I save for retirement?

5. How should I invest my retirement savings?

6. What are the tax implications of RRSPs vs. TFSAs vs. unregistered investment vehicles?

7. Am I too young or too old to start saving for retirement? (Hint: No!)

8. Should I borrow money to invest? (Hint: No!)

9. What happens when I retire?

10. What happens to my retirement savings when I die?

If you know Gail, you know that she’s not prone to equivocation. She has strong views about some of these issues, but she’s also careful to lay out a variety of options when it’s warranted. One thing she’s particularly peeved about is the proliferation of bad information coming from some advisors, some sectors of the media and the financial industry in general. Her antidote for all of this is simple common sense and she delivers that in spades.

5 Things I Liked about This Book

1. Emphasis on Balance

Gail stresses throughout the book that saving for retirement is a balancing act. Contributing enough to all of our financial priorities without living a spartan existence is the key, but it can be easier said than done. “Having enough money is a wholly personal thing; there’s no magic number. You have to decide if what you have is enough.”

2. Find What’s Right for You

Not every investment vehicle fits for every saver. Your idea of enough and the best way to get there will be different than mine depending on a whole host of factors. Some of us have company pension plans to factor in and some of us don’t. Our income level will affect how much we can save, our choice of investments and the resulting tax implications. It can also affect how much we will receive from the government once we retire.

3. Easy to Read and Understand

Gail’s tone is very conversational and she brings an element of simplicity to even the more complicated aspects of retirement planning.

4. Clear Examples, Charts and Forms

Never Too Late doesn’t just tell us how to save for retirement, it shows us. There are forms to help you calculate your net worth and plan a budget, as well as helpful charts on investments and sample returns. Gail also breaks down a lot of the information according to age: a 50-year-old will have a different approach to retirement than a 20-year-old.

5. Emphasis on Saving, Action, and Specifics

It’s easy to get caught up in the acronym whirlpool at the heart of the retirement savings industry. Sometimes I get so preoccupied with trying to choose the best investment that I forget to prioritize the savings themselves. No savings, no investments. Gail offers lots of specific suggestions on how to cut spending and increase savings.

You can know heaps of information about retirement planning and investing, but it won’t do you any good if you don’t put it into action. Gail points out that “your life is yours to make of it what you will. And it’s never too late to get started making it what you want it to be.”

If you’ve read the book, would you share your thoughts? If not, do you think this book might be of some help to you?

Book Review: Jump Point

Kim Petch — Fri, 11 Feb 2011 10:45:38 +0000

When they do arrive, Jump Points are necessarily startling and disruptive periods. They upset the status quo, threaten existing leaders, and rattle the complacent. . . . Most of our prevailing business assumptions will be challenged and a whole set of new ones will be born as businesses everywhere make the Jump.

~ Tom Hayes

I received a book called Jump Point: How Network Culture is Revolutionizing Business for Christmas in 2009. I didn’t get around to reading it until recently. That’s noteworthy because the topic of the book is quite time sensitive. You realize that when MySpace is referenced as the top dog in the social media world and Facebook is mentioned as an up-and-comer – and the book just came out in 2008!

It’s been interesting to read this book at the beginning of 2011 because that’s the year in which its author, Tom Hayes, estimated that the Jump Point would occur. Put simply, the Jump Point is when the number of internet users reaches 3 billion. That’s significant because it “will mark the first time in human history when all the world’s producers and consumers are unified in a single, integrated global system.” This will cause tectonic shifts in the way we think about and do just about everything.

10 Truths of the Jump Point

Mr. Hayes offers plenty of insights for businesses looking to become (or remain) successful in the post-Jump Point economy. Apparently, middlemen and intrusive marketers need not apply. In the new economy, businesses that are inflexible or try to control information rights will not survive. Instead, they will need to offer “mechanisms for customer influence and expression . . . or go home.”

In order to sell to the new generation of consumers, the “winning brands . . . don’t ask consumers to drink the Kool-Aid; they invite them to make it.” We are already seeing trends like this in music, publishing, and many other industries. Some of the new truths that the Jump Point will reveal are the following:

1. You Can’t Fight the Network

Businesses will need to understand how networks function and work with them rather than trying to change them to conform to antiquated standards. They need to understand the viral nature of networks and use that property to connect with potential customers in a way that authentically addresses their needs.

2. Social Communities Are the New Marketplace

If you want to grow your brand, you need a social media presence. But be forewarned: these communities “operate on a code of behavior centered on respect and reciprocity, participation, and affiliation.” The best marketers take the time to build a personal relationship with their fans, and attempt to provide real value to consumers.

3. Use the F-Word

Free. Many companies large and small have grown their brand and their revenues by offering consumers something for free. They can then sell premium or value-added upgrades to those who want to kick it up a notch. Hayes offers the example of Adobe and its PDF reader.

4. Reward Attention

With all of the options and information the network presents each of us every moment of the day, attention will come at a premium in the post-Jump Point society. Consumers don’t want to waste their precious attention on products or information that’s irrelevant to them personally. Businesses will need to provide real value to prospective customers in exchange for their attention.

5. Break the Time Barrier

Time zones become somewhat blurry in the Internet Age. The articles I write today can be viewed by anyone anywhere in the world at any time. And consumers have come to expect everything on demand. Servicing customers in a globally connected world means that businesses will need to have a 24/7 component or be replaced by competing enterprises that do.

6. Make Everything Mashable

Hayes believes that businesses that insist on pushing DRM (Digital Rights Management) will lose. Post Jump-Point consumers will be turned off by limits. Companies that give customers a sense of ownership will earn their trust, their loyalty, and their purchasing power.

7. Think Abundantly

The network is pretty much infinite. Unlike a bricks and mortar business, the shelf-space on the internet is limitless. There are no constraints due to finite warehouse space. The “new customer paradigm” allows people to edit and contribute to content. Businesses that find a way to tap this resource will thrive.

8. Compete on Trust

Mr. Hayes proposes that “trust is the real currency of the Jump Point economy.” The winning companies will be the most trusted brands.

9. Become Contagious

A recommendation from a trusted friend is so much more powerful than any type of advertising campaign you could possibly devise. The successful Jump Point enterprise will produce products that are infectious and take advantage of the momentum opportunities that the network culture provides.

10. Pandenomics: The Network Favours Blockbusters

The network provides entrée to smaller, niche players to be sure. But it’s really designed for “pandemic economics.” The viral mass dissemination of information that the network allows can create blockbusters very quickly. A faster return on investment for any business means that they can reinvest in innovation sooner. Blockbusters can create new markets and stimulate innovation and competition.

Not Just for Geeks

Let me preface this section by noting that I’m about as far from being a techie as you can get. Yes, I work online. But I’m a writer first and foremost. In fact, if I want to write something really good, I still require a paper and pen. My brain just doesn’t spit out the pretty words for the keyboard the way it does for my trusty dollar store notebook and pen.

One reviewer called this book “the Tipping Point for geeks.” I disagree. I think this is a fascinating read for anyone who will live through this Jump Point. I was very much intrigued by the insights into the social, marketing, and investing implications of this seismic shift.

The Jump Point will bring with it countless paradoxes. I found the prospect of an Orwellian kind of Big Brother presence a little frightening, and the sheer uncertainty of it all a little daunting. Still, I had to wonder whether this revolution might help us out of the tremendous economic pickle we’ve gotten ourselves into.

After all, if we’re going to have all kinds of new ways to conduct business, we’ll need lots of folks to help us navigate our brave new world. If cybercrime becomes a problem, we’ll need special law enforcement policies and personnel to combat that. And if this thing gets as big and pervasive as it sounds, it could spawn a lot of new jobs, many of which we can’t even conceive at the moment.

Three questions then come to mind:

Will the number of jobs created by this new economy be enough to offset those lost in the old economy?
Will the economic growth created by this new economy be enough to offset all of the intellectually-challenged financial decisions we’ve made over the past few decades?
Will the Internet Age be one in which the playing field is finally leveled a bit, or will we see even more social and economic bifurcation?

How do you feel about the changes that technology is bringing? Are you ready for the Jump Point?

Book Review: -Able

Kim Petch — Fri, 28 Jan 2011 10:45:01 +0000

Play the song that is natural for you to play, in the way that is natural for you to play it, and in front of the fans that most need to hear it.

~ Scott Ginsberg

Update: This review was included in the Totally Money Blog Carnival #4 posted at Budgeting in the Fun Stuff. Thank you!

Scott Ginsberg has branded himself as “The Nametag Guy.” In fact, he’s all about branding, marketing and finding every way possible to make yourself more approachable. He writes a lot. His latest book, -Able offers “35 strategies for increasing the probability of success in business and in life.”

35 Ways to Be More Able

Each of the 35 chapters offers specific strategies to be more “able” in a certain area, and each offers a catch-phrase designed to crystallize the main idea and make it stick. The first five chapter titles (and subtitles) are as follows:

1. How to be More Advance-able than a Last Place NASCAR Driver High on PCP: Accelerate success – don’t create it.

2. How to be More Addict-able than Crack, But Without Killing Millions of People: I can’t quit you!

3. How to be More Book-able than George Bush as the Keynote Speaker for the Association for the Mentally Challenged: “And YOU can count. On me. Waiting for YOU in the parking lot.”

4. How to be More Brand-able than Dennis Rodman’s Left Butt Cheek: There are no cover bands in the Rock and Roll Hall of Fame.

5. How to be More Break-able than the Hideous Purple Vase Your Mom Used to Keep By the Front Door: So the big fish can jump right into your lap.

Depending on your personality type, and maybe your age, some of you are probably thinking, “Gee, that doesn’t sound all that professional.” Others are probably thinking, “Wow. This guy is funny. He really knows how to drive a point home and entertain all at the same time.” If you’re a typically understated Canadian, you may find some of the messages in the book a little too loud, a little too smooth, or a little too much.

The truth is, Scott is a young guy. He writes with a young voice. But what he has to say contains the type of wisdom that you would normally associate with someone who’s been around a lot longer than he has.

Style and Substance

If you were less than impressed by some of the chapter titles above, you might be thinking that the message of -Able is all style and no substance. On the contrary, Scott is adamant about the idea that style is useless without substance. Here are a few of the recurring themes that stood out to me:

Be Yourself: You can’t be successful if you’re not being authentic. If you offer your true self to people, you’re automatically offering a unique product.
Be Credible: Do what you say you’re going to do when you say you’re going to do it.
Be Visible: Put yourself out there. “Be public or be penniless.”
Be Honest: “Character trumps technique.”
Be Valuable: Offer people high quality at a reasonable price. Give them “meaningful, concrete, immediate” solutions to their problems.

If you’re getting the feeling that this book is full of one-liners and catch-phrases, you’re right. But there’s plenty of substance behind each and every one of them. The tips and suggestions are concise, practical and actionable.

Classic Wisdom 2.0

Scott Ginsberg has managed to combine time-tested business principles with the knowledge you’ll need to navigate the web-enabled landscape before us. The internet has transformed the way we do business as well as the way we do life. And yet some things remain the same.

We may be able to reach a lot more people a lot more quickly with the help of social networking and the myriad of other efficiencies that today’s technology has to offer, but we won’t be successful for long if we don’t stick to the core values that are common to all great businesses and all great people. If you want to be successful in business or in life, it still pays to act with integrity and help people solve problems.

Although the subtitle of -Able promises 35 strategies, I was surprised to find that many of those chapters actually contained dozens of useful ideas and lots of different ways to look at each topic. While the book is aimed primarily at entrepreneurs, salespeople and marketing professionals, there’s plenty of value here for just about anyone who’s willing to take action to improve their career and their life.

Does this sound like a book you might want to try out?

Book Review: Super Sectors

Kim Petch — Fri, 14 Jan 2011 10:45:59 +0000

Stock market activity over the last ten years has proven that “buy and hold” is a dead concept and it’s very likely that going forward over the next ten years, “buy and hold” will continue to be an invalid and ineffective concept. Because over the last ten years, the S&P 500 has generated a negative rate of return and that doesn’t even factor in the ravaging effects that inflation has on your portfolio.

~ John Nyaradi

Update: This article was included in the Carnival of Wealth#21 at Personal Dividends as well as the Wealth Builder Carnival #24 at My Wealth Builder. Thanks!

John Nyaradi’s book Super Sectors: How to Outsmart the Market Using Sector Rotation and ETFsis relatively new, having been released in September of 2010. Much of the information it contains, however, marries the analysis of contemporary market conditions with time-tested trading wisdom. It’s only about 250 pages long, but it contains quite a variety of investment insight.

The book is divided into six parts, each of which addresses a particular aspect of navigating today’s volatile markets. The goal is a realistic approach to investing. John acknowledges that we will not likely be able to catch market tops and bottoms with precision, but we can sidestep major declines, preserve capital, and participate on upside moves.

Part I: Five Wall Street Fairy Tales and Why the Conventional Wisdom is Flawed

As you’ve probably guessed from the opening quote, Mr. Nyaradi is not a fan of buy and hold investing. That doesn’t necessarily mean he’s advocating day trading either. He just believes that buying and closing your eyes until retirement probably isn’t the brightest move:

“Buying and holding is like wearing your swimsuit year-round and standing by your pool. You’ll be fine in summer, but when winter comes, you’ll get frostbite.“

In fact, the concept of “buy and hold” is his #1 Wall Street Fairy Tale:

“As a buy and hold investor, you’re saying that you’re willing to let your future be controlled by market forces rather than taking charge of your own destiny. You’re willing to let the law of averages determine what kind of retirement you’re going to have, and if you’re unlucky enough to match up your best earning and savings years with a bear market decline, the outcome will not be positive.“

The other fairy tales are as follows:

Asset Allocation: By this, Mr. Nyaradi means the standard methodology of diversifying your investments among stocks, bonds and other asset classes and getting more conservative as you age. This is no magic elixir. Bonds can suffer bear markets too, and in the current environment, they offer very low real returns. The other major issue is, of course, that this approach may not provide you with any diversification at all, since asset classes are highly correlated nowadays.
Dollar Cost Averaging: I must admit that this one raised my eyebrows. I’ve always seen this as a layman’s way of buying more shares at lower prices, but John cites research showing that lump sum investing beats dollar cost averaging two thirds of the time.
The Market Goes Up 8 Percent a Year: In light of the serial crashes of the past decade, it seems pretty obvious that this is not a good bet.
Sell the Leaders, Buy the Laggards: Sometimes leaders continue to lead for a very long time. Often, laggards just keep dropping.

Part II: Why Exchange Traded Funds

In this section, Mr. Nyaradi offers a brief history of Exchange Traded Funds (ETFs), as well as a description of the main ETFs on the market right now. You can buy ETFs for just about any geographical region, asset class, or index out there. You can also profit from bear markets using inverse ETFs and leverage your investments using 2x or 3x ETFs.

Part III: Sector Rotation: What It Is and Why It Works

Sector rotation involves buying and selling ETFs linked to various sectors as the economic cycle progresses. Certain sectors outperform at different points in the cycle. As someone who’s tried this before, however, I can tell you that it’s not always easy to figure out our precise position in the economic cycle – especially when you throw in events like those of 2008.

Part IV: Trading Systems Designed to Outperform the Indexes

In this section, John offers a brief description of three sample trading systems you can use to invest in the markets. He’s even got one that’s called “Almost Like Buy and Hold“. It’s basically a long term trend-following system using the 70-week moving average.

This system is very simple and easy to implement for people who are too busy to trade actively, but history shows that it will get you in for most of the long term upswings and out for a good portion of bear markets. As with any trend-following system, you can get some whipsaws, but back testing shows this system beats buy and hold by a nice margin.

Mr. Nyaradi also offers “The Simple Trading System“, which uses daily point and figure charts and “The Golden Crossover System“. You may be familiar with the latter system, whereby you enter trades when the 50-day moving average crosses above the 200-day moving average. You can experience whipsaws with this system too, but no approach is perfect and it will still generate good returns.

Part V: The Sector Scoring System: Trading Concepts, Challenges and Conundrums

This section describes signals for entering a trade and describes some of the basics of effective trading. There’s a great chapter on the psychology of trading. Although I’ve read about many of the ideas before, these fundamental principles can’t be repeated often enough. As with personal finance, there’s a big difference between knowing what you need to do and doing it.

Part VI: Super Sectors: 5 Super Sectors that Could Change Your Life

The final part of the book identifies 5 sectors that will be instrumental in determining how the economy and markets will progress over the coming decade. You’ve likely read about many of them elsewhere (including here on Balance Junkie), but John offers great perspective on each of them. Speaking of great perspective: The final chapter of the book offers a multitude of perspectives from over a dozen well-known market commentators. I loved the variety of factors each person raised, but two themes kept coming up over and over again: China and commodities.

Final Thoughts

If you think market timing is impossible or that trading is a bad word, this is probably not the book for you. But if you’re interested in learning about some alternatives to buy and hold investing, this book provides a nice overview of the current market environment and the basics of technical trading.

You can find out a lot more at John’s Super Sectors site and learn about several subscription programs he offers to help you trade ETFs. You can try them free for 30 days. Note that I have joined the Wall Street Sector Selector affiliate program, so that if you head there via any of the links on Balance Junkie and end up subscribing after the trial, I’ll receive a little compensation as well. Either way, the book is a great read if you’re at all interested in learning more about markets, trading, and sector rotation.

Update: My apologies for omitting this at first: John Nyaradi has generously offered at free copy of Super Sectors to a lucky Balance Junkie reader. Just leave a comment below and you will be entered into a draw for a copy of the book. The winner will be drawn January 21st and announced January 22nd. Good luck!

Does this book sound interesting to you?

Book Review: Generation Earn

Kim Petch — Fri, 26 Nov 2010 10:45:42 +0000

Our generation might have grown up in an era of relative opulence, but as I make use of a closet full of second-hand baby clothes and a hand-me-down crib, I can’t help but feel lucky that we had the chance to learn some of that old-school frugality.

~ Kimberly Palmer

Today’s opening quote comes from a new book by Kimberly Palmer, the Alpha-Consumer blogger and columnist for US News & World Report. It’s called Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back. It hit the shelves shortly after Kimberly and her husband welcomed their first child, so she’s knee-deep in all of the opportunities and challenges she discusses in the book. You can win a free copy by leaving a comment below. (Sorry, but this particular draw is only available to U.S. readers.)

The “generation” referred to in the title and the quote above is basically Generation Y, or those who are very roughly 20 to 35 years old. These young people have been given a lot of different monikers, from Millennials, to Generation Next, to Echo Boomers. But the title aims to turn one particular nickname on its head: Generation Debt.

Generation Earn

Twenty and thirty-somethings are seen by some as a generation of slackers who are more than willing to rack up thousands of dollars in debt to secure an education, a prime career, a giant house, and all the gadgets their credit card can buy. No doubt, as with any generation, there are those who fit this description. But this book aims to show that many young professionals, having landed in the job market at one of the most economically challenging times in several generations, isn’t necessarily all about binge and bling.

According to Ms. Palmer, her “generation doesn’t need to define itself by debt and financial struggle, but we do face new challenges and trade-offs.” For many people, including the Millennials, the “financial crisis of 2008 dovetailed with a growing interest in sustainability, simplicity, and even frugality.” Like most of us, they just want to have a decent life, with a reasonably rewarding career, home, and maybe marriage and children. That’s not too much to ask, is it?

In the Book

The book is largely devoted to answering many of the key questions a young person embarking on a life of their own might have:

How much to save
How to increase, diversify and maximize your income
How to handle debt
How to handle finances as a couple
How to invest your savings
How to plan for retirement
How to manage the costs of having children
How to spend and invest in socially responsible ways
How to give some back

One of the things I loved about the book is that all of these questions are addressed in a way that allows for a ton of individual customization. This is no one-size-fits-all handbook. It’s chock full of case studies, anecdotes, and practical ideas. Each chapter is sprinkled with a few short “Quick Tip” sections and ends with a set of numbered “Exercises” that provide actionable ideas related to the content of the chapter. There are also some specific questions and answers throughout the book that provide additional information.

Saving and Investing Advice

As for the advice offered in the book, most of it will be relatively familiar to those who frequent personal finance blogs. But there were so many interesting stories about how different people are handling starting out in this challenging environment, it was still extremely informative – and, as I always say, you can’t hear this stuff often enough. Most of the ideas on saving and investing are fairly standard, but also take note of the unique economic climate in which we are all living.

As you might expect, I would take issue with some of these standards, including the idea that twenty-somethings should have 80% -100% of their retirement money in stocks, the diversification imperative, and the old “never time the market” admonition. I would simply say that you may have a high stock allocation, but that it should by no means be considered a must. BJ readers are likely more than familiar with my thoughts on the reduced benefits of diversification in markets that have become very highly correlated. You also know that I don’t have anything against timing the market, and that I think it can be essential to your investment success, provided you understand the risks. There are risks in not timing the market as well.

Having said all of that, Ms. Palmer is careful to point out that it’s unlikely that we’ll see the types of returns the market delivered from 1980-2000 again for a while. She also recognizes that advisors and retirement calculators that suggest you plan for 10% annual stock market returns are likely way too optimistic. The overall message is to curb your enthusiasm and plan on saving more due to reduced market and pension expectations. I certainly can’t argue with that.

Is It Just for Young Professionals?

At 40, I’m not a member of Generation Y. We handled the challenges of fitting twin babies into a one-bedroom apartment 15 years ago in a very different economic climate. And yet I found this book to be very helpful and informative. While it specifically addresses the concerns of younger people getting started in life, it also offers a lot of great tips and insights for anyone who is trying to navigate their way through these choppy financial waters.

While most of the advice in this book is relevant to just about anyone, it does refer to American financial products and standards. So even though you will see discussions on 401Ks rather than RRSPs, it’s still a very worthwhile read. It’s not too long (about 215 pages) and would make a great reference book for yourself, or maybe even a Christmas or wedding gift for anyone who’s ready to get their financial life on track.

If you are a U.S. resident and would like a chance to win a free copy of the book, just leave a comment below. My son will choose a winning comment number in a week’s time, and I’ll announce the winner on Saturday, December 4, 2010. Thanks to Kimberly Palmer for offering the free copy, for writing this book, and for inviting me to review it!

Book Review: The Fearful Rise of Markets

Kim Petch — Fri, 19 Nov 2010 10:45:58 +0000

Synchronized markets warp perception and force politicians and investors alike into historic errors – but eventually collapse under their own contradictions.

~ John Authers

John Authers, investment columnist for the Financial Times, explains why so many market orthodoxies were smashed during the financial crisis in The Fearful Rise of Markets: Global Bubbles, Synchronized Meltdowns, and How to Prevent Them in the Future. Published by FT Press, the book offers a comprehensive treatment of the factors that led to the global synchronization of markets as well as some cautions for those who still cling to these orthodoxies. More than that, Mr. Authers has some concrete suggestions for how to prevent these synchronized bubbles in the future.

5 Trends from the Fearful Rise of Markets

Mr. Authers weaves five main themes throughout the book. Over and over we see these trends borne out in the economic events of the past few decades:

Principal/Agent Splits: When you as a principal hire an agent like a financial advisor to manage your money, you expect that they will act in your best interest. But the agent may in fact have numerous conflicts which prevent him/her from doing so. What’s best for you may not be what’s best for the agent’s firm or for him/her personally.
Herding: There are strong incentives for today’s investment professionals to follow the crowd or risk losing their job. When everyone is in the same investments at the same time, bubbles inflate.
Safety in Numbers: Mathematical models have contributed to the illusion of certainty in markets. These models promoted the idea that there was safety in diversification, but missed the fact that investors using this strategy all at once created mispriced asset values. When those asset prices inevitably revert to the mean, markets correct swiftly and violently.
Moral Hazard: As the memories of the 1930s faded, banks found ways to circumvent and eventually dismantle the rules put in place to prevent another Great Depression. Eventually bankers and investors came to believe that there would be no penalty for taking increased risks as a result of government bailouts and easy money.
The Rise of Markets and the Fall of Banks: Many of the roles banks have traditionally played have been usurped by the capital markets. Assets that were once available only to professionals are now accessible to almost anyone with the click of a mouse. Companies that wanted to raise capital had to go to the bank. Now they have the option of doing so via markets.

Many of these trends are still in place in spite of (as evidenced by?) the record rebound in the stock market.

Part I: The Rise

The book is divided into three parts. Part I looks at the rise of the investment banking industry, Modern Portfolio Theory and indexing and how all three have helped in the formation of asset bubbles and busts. Long Term Capital Management (LTCM) was run by at least a couple of Nobel Laureates in the 90s and it was based on mathematical models. When it failed spectacularly, the Federal Reserve intervened to rescue the markets from collateral damage. And so the Greenspan put was born. You might call it the prequel to the quantitative easing saga to which we are currently being subjected.

Once LTCM was rescued, moral hazard gave investors the confidence to put more money to work in the markets. They promptly migrated en masse into dot com companies. That bubble topped out on March 10, 2000 and the Nasdaq proceeded to fall 79% over the next 2 years. As we all know, it has yet to even come close to fully recovering 10 years later.

Part II: The Fall

The most recent bust began on February 27, 2007 with the “Shanghai Surprise” and was followed by 2 years of extreme volatility, bank runs, financial failures, and selective rescues for financial institutions and auto companies. Many companies that were deemed too big to fail received billions in taxpayer backstops. Those outside the Too Big to Fail bubble actually did fail.

Mr. Authers aptly points out a number of financial orthodoxies that were destroyed in the crash. Chief among them may have been what he calls the “paradox of diversification” and of course modern portfolio theory, from which this orthodoxy emanated. The paradox of diversification means that “the more investors bought in to assets on the assumption that they were not correlated, the more they tended to become correlated.”

Part III: The Fearful Rise

Part III details the stock market revival that was sparked by a recovery in emerging markets, especially China’s stimulus efforts. Next came one bailout and stimulus program after another as governments and central bankers worldwide pulled out all the stops to bring global markets back from the abyss. These efforts did spark a market rally, but they also increased moral hazard, and herding behaviour to ever higher levels.

According to Mr. Authers, the 2009 rally was the most impressive in a century, but there are still signs that the “perverse synchronization” of markets remains. He ends the book with some suggestions on how to combat each of the five main trends mentioned above. For one, he suggests that if we want to keep the idea of indexing around, we should be using fundamental parameters rather than capitalization weighting. He also thinks that investment managers need to be compensated differently and that investors should simply refuse to pay the types of fees charged by hedge funds.

There is so much more to this book than I have room to comment on here. If you have any interest in learning about some of the other suggestions Mr. Authers has for re-introducing fear into the markets, or if you just want to try to understand how markets have become so highly correlated, this book is well worth your time.

Your comments and questions are always appreciated.