We’re not talking about mere balance here . . . A visionary company doesn’t simply balance between idealism and profitability; it seeks to be highly idealistic and highly profitable . . . a highly visionary company doesn’t want to blend yin and yang into a gray, indistinguishable circle that is neither highly yin nor highly yang; it aims to be . . . both at the same time, all the time.

~ James Collins & Jerry Porras, Built to Last

The English proverb tells us that we can’t have our cake and eat it too. I’ve often struggled to understand exactly what that means. I guess it’s supposed to imply that we can’t have it both ways. How can we preserve something of value if we continue to consume it?

Today’s quote comes from a book I’ve been reading on visionary companies: the ones that stand the test of time and continue to evolve while remaining true to a set of core principles. Principles you say? How can you have principles and profits? Aren’t they mutually exclusive? Far from it, according to the research performed by the authors.

[Side Note: The book came out in 1994, so some of the companies we might think of as visionary (Apple) are not included. Interestingly, the research shows that a charismatic, "visionary" leader (like Steve Jobs) is not only unnecessary for a company to endure, but it can actually be detrimental. A visionary company does not always have a high-profile CEO, but one that puts systems and values into place that persist far beyond his or her tenure at the helm of the company.]

How to Have Your Cake and Eat It Too

Not only is it possible to support seemingly opposite principles at the same time, it’s actually a common characteristic of the most successful corporations. According to the authors, these visionary businesses shun “the tyranny of the OR” while embracing “the genius of the AND.” They are simultaneously profitable and principled. They endorse autonomy and adherence to core values. They embrace larger, long term goals while they execute the daily details as flawlessly as humanly possible.

Can we juggle opposing values in our business and personal finances? Can we save enough for retirement and our children’s education while we enjoy a reasonably prosperous existence? Can we reap profits without compromising our ethical principles? Why not?

Usually, the answer to “Why not?” is something like “I don’t know how”, “my situation is different” or “I don’t have time.” Perhaps that’s why the list of visionary corporations is not all that long. I know that these are some of the reasons my personal finances aren’t where I’d like them to be. It’s hard. It takes, time, effort and focus, three things that seem to be in short supply these days as we become lost in the daily cacophony of media messages.

Here’s what I’m going to do to cut through the noise and achieve a more integrated balance among conflicting priorities:

Time: I’m going to cut out any activities – mental or physical – that don’t advance my goals or enrich my quality of life. While I may spend less time reading articles or interacting online, I’m also going to try to increase the amount of time I have to recharge so that I can be more effective in achieving my primary goals.

Effort: I usually do OK in this area, but I am often guilty of putting too much effort into projects with too little yield.

Focus: My attention has become divided of late among too many projects, to the extent that I feel like I’m not performing as well as I’d like at any of them. I’m narrowing my focus.

You can call these some of my larger goals for 2012, but I’m not waiting until January 1st to start. I’m starting now. Today.

Until We Meet Again

I’ve written many articles over the past 2 years on how far we’ve strayed from the principles of free market capitalism. We’ve socialized losses for large institutions and expected smaller businesses to live (and too often, die) by the strict capitalist code that says failures must fail. Cheaters have prospered. Our core values have become bifurcated, diluted, and unrecognizably grey.

I started Balance Junkie to try to help people understand that we are in the midst of a transformational period – one that will have a significant impact on our finances and perhaps our quality of life. Not wanting to see folks hurt financially as they were in the crisis of 2008, I hoped to shed some light on the fact that the neither the crisis nor the secular bear market ended with the March 9, 2009 market bottom.

I’m not sure I’ve made any measurable difference. I still see a lot of complacency and can-kicking. Many are still following the models that contributed to the crisis and listening to the same gurus and bloggers who failed to steer them around the 2008 debacle. Is it worth my time, effort and focus to continue to write about economics and personal finance?

That’s a question I hope to sort through over the fading weeks of 2011. At the same time, I’ll be turning my focus to helping Mr. Cents get a business off the ground in our region. Right now, that feels like the right place to direct my focus. Rather than simply writing about the economy and idealistic capitalism, I’m going to become a more active participant. If you’re thinking this sounds like a farewell article, you may be right – and it hasn’t been an easy one for me to compose.

I’m putting Balance Junkie on sabbatical until January. I may write something in the interim if I have the time, but I will certainly return in January with some kind of answer to my question. In the meantime, I wish all of you peace, prosperity and balance and I sincerely thank you for reading Balance Junkie over the past couple of years. My email box will remain open during the sabbatical, so please don’t hesitate to say hello.

Can we have our cake and eat it too?

Related posts:

1. Balance Is a Journey
2. The Change Imperative
3. Taking a Break Is a Great Investment

It is literally true, as the thankless say, that they have nothing to be thankful for. He who sits by the fire, thankless for the fire, is just as if he had no fire. Nothing is possessed save in appreciation, of which thankfulness is the indispensable ingredient. But a thankful heart hath a continual feast.

~W.J. Cameron

It seems the older I get the smaller the things for which I’m truly thankful become. When I was a child, I was thankful for obvious things like my family and my home and my favourite possessions. Once I had children, they kind of moved up to number one on my list.

Now, I’m still thankful for all of those things, but I notice that the things that really make me feel grateful are a little more subtle – and there are a lot more of them. Here’s a list of some of the little things I’m thankful for this Thanksgiving Day:

• I love the view from our back window each morning. I’m not at all a morning person, so that’s really saying something.
• I’m thankful for the good morning hug I get from my youngest son to start each day.
• I’m still surprised when my two older boys say “Thanks for dinner Mom” – even on the evenings when I know they didn’t really like what I made.
• I can’t help but laugh when I watch my 16-year-old son explaining something to me with great vigour. All I can see is his 4-year-old incarnation doing the same.
• The smell of home-cooking in my Mom’s kitchen is something I enjoy endlessly.
• I love the crack of a baseball hitting the sweet spot on the bat as well as the sound of it smacking safely in the glove.
• I’m so thankful for every smile or kind word from a stranger. It reminds me that there’s good in this world in spite of the daily news flow.
• I’m thankful for a cold drink on a hot day and a warm fire on a cool night.
• I’m always grateful for daisies. It doesn’t matter what colour.
• I look forward to the same breakfast I’ve been eating every morning for over a decade now. It helps ease the trauma of daybreak for me.

Happy Thanksgiving to my fellow Canadians – and to anyone else who’s appreciating the small stuff today!

What are some of the little things you’re thankful for today?

Related posts:

1. Take the Thanksgiving Challenge
2. Thoughts on the GM IPO
3. 20 Cents from March 2011

The following is a guest post from Barbara Friedberg. She endured a much more arduous moving ordeal than I did this summer. Check out the 5 lessons she learned and then head over to Barbara Friedberg Personal Finance to read more. While you’re there, download her free 20 Minute Guide to Investing. Thanks Barb!

5 Things I Learned From My Cross Country Move

As Kim from Balance Junkie and I each moved this summer, we decided to share our “lessons learned”. Although she moved 3 hours away, and I moved about 10 times that, the process is the same! Please check out her 5 Lessons Learned from Moving at my site after you’re done reading.

Graduate school and job changes have led to 6 moves during our married life. Initially, I’m nervous and scared about moving. After getting used to the idea, I get excited and pumped about the change. This time was no different.

Before writing this article, I went through all of my related “moving” blog posts. What struck me the most was that my first one was published mid-March. And we actually moved into our home mid-August. That means the entire process went on for over 5 months. On the positive side, it makes me feel less awful that after a month in the new condo I am still not “caught up.” I’ve got boxes to unpack and work left over from the summer to complete.

So, what did I learn from the ordeal that will be helpful for you?

1. Moving stinks-In the hierarchy of life stressors, moving is near the top. So, don’t expect it to be stress free. In fact, accept that in the months preceding and those following the big day, you are going to experience inordinate stress. Take some time for fun and pampering in order to modulate the stress. And remember, that like everything else in life, these stressors are time limited.
2. Build up as big a savings cushion as possible-I knew we would need to paint the house, purchase porch furniture, window coverings, and pay for a multitude of inspections. So….. we began saving for these various and sundry expenses several years in advance as my hubby looked for a new job. What I didn’t expect was the extra $3,000.00 cost of replacing the carpet that was ruined by the sellers peeing cat! That was a real unpleasant surprise, but fortunately, we had the resources to handle it.
3. Prioritize, you can’t do everything-Although I’m paying the price now, I put off what I could during the transition time. Realistically it would have been impossible to keep up with all of our family’s financial recordkeeping and some of my more minimal job duties while readying the house for sale packing. This deliberate procrastination cut down on moving stress. Although not a perfect solution, it allows extra time for moving related activities.
4. Sell and donate as much as you can-Although this one is just common sense, it’s one I would encourage you to take to the max. We had a huge garage sale and I began getting rid of stuff months before the move. In spite of this prudence, we still had way too much stuff, and I’m embarrassed to say, had to rent a storage unit for the excess. (Please don’t tell anyone this, it’s embarrassing.)
5. Don’t expect to sell your current home and move into the new one the next day -During each of our last 3 moves we had to store our belongings and live in temporary quarters. In spite of this, I believed that I could perfectly coordinate a cross country move and avoid storage and a temporary living situation. Boy was I wrong! In fact, 5 weeks living with the folks and storing our stuff, smacked me upside the head!

Looking back over the past 5-6 months, I’m beginning to see the light at the end of the tunnel. My work desk is almost visible from underneath the rubble. I have the inside clutter confined to one room. And we are loving our new home and town! In moving and life, cut yourself a break and realize perfection is unattainable. Enjoy the process, in whatever you are doing, and your life will be richer.

Barbara Friedberg, MBA, MS is editor-in-chief of Barbara Friedberg Personal Finance.com where she writes to educate, inspire, and motivate for wealth in money and life. Learn about personal finance from a real life Portfolio Manager & MBA professor! Stop by the website and download a valuable free eBook, 20 Minute Guide to Investing.

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Oh, would that my mind could let fall its dead ideas, as the tree does its withered leaves!

~Andre Gide

Have you ever felt like you were in a rut? No matter how hard you try to shake things up, start fresh or come up with innovative solutions to what’s bugging you, you just seem to end up right back where you started. I’m sure most of us have felt this way at one time or another about one or more parts of our lives.

In my experience, it’s hard to engineer an epiphany. It’s like trying to catch a pesky fly. Just when you’re certain you’ve got it in your sights it flits away, eluding your grasp anew. Sometimes new perspectives incubate best at a simmering pace rather than a pressure cooker intensity.

To instigate behavioural, intellectual or emotional change we sometimes need to make some physical changes. I’m not sure why, but it works. How many times have you found yourself on vacation or visiting another locale and wondered: Why can’t I relax and enjoy life like this at home? Why does food taste better here? Why do colours look more vibrant? Why do I feel more engaged?

Do you ever find that you’re a lot more productive after a vacation or even a short break? How many times do we skip our breaks and put off vacations with the idea that we’ll somehow accomplish or earn more if we just push it a little harder a little longer? I do it all the time. I fritter away minutes with unproductive activities because I really don’t want to do the work at hand. Then I become stressed because I’ve wasted time by neither working nor relaxing. Then I’m even less productive the following day because I’m burnt out. It becomes a vicious cycle.

Climate Change for Life

While climate change has come to have negative connotations – and rightly so – it can actually be very beneficial for us in the context of changing unproductive habits. We can change a seemingly immutable vicious cycle into a dynamic virtuous circle by simply changing our environment. We can start by identifying any toxins in our environment – both internal and external – that are keeping us from the change we need:

1. Toxic Thought Patterns: Do you have recurring thoughts that are keeping you in your rut? The amazing thing about these unproductive thought patterns is that there’s usually just enough truth in them to make it hard for us to let them go.
2. Toxic People: There are some folks who tend to be perpetually negative, supporting our toxic thought patterns. Like it or not, they can influence our perspectives and our behaviours. When we cultivate relationships with healthy people, we choke out toxic thought patterns. Another, perhaps more uncomfortable question to ask ourselves is whether we might actually be a toxic force in our own life and possibly the lives of those around us. Even if the answer is yes, that doesn’t mean we can’t change it.
3. Toxic Geography: Do you find that the general attitudes in your city, neighbourhood or workplace encourage healthy thought patterns, or do they sap your energy and discourage you from making the changes that will improve your life? If so, consider a change. You might be surprised at how much a change in venue can effect a change in your outlook and behaviour.
4. Toxic Environment: Our physical environment can become toxic if we allow our surroundings to become too disorganized. My desk, for example, is a constant source of aggravation for me. Somehow I never manage to keep it tidy for more than a few hours at a time. That can make it very time-consuming to find the things I need and be as productive as I’d like. While the move was a great reason to get closets, drawers and other parts of our new home organized, my desk, as usual, has been the last to receive my attention. Maybe this week I’ll finally get to it.

This type of regular assessment and maintenance can lead to positive outcomes for all four quadrants of your life balance sheet. Just as you will pull weeds and fertilize your lawn, it’s important to cultivate a positive environment in life. When you have a healthy lawn, it’s very difficult for weeds to take root.

Financial Climate Change

As with every other area of life, it’s easy to fall into bad habits with our finances or simply fail to create healthy habits. Over time, these poor habits can become so comfortable that we come to assume they are unchangeable. That’s when things can get really toxic.

We can start to feel like we don’t have any control over our lot in life or that change is hopelessly unattainable. While we may not be able to turn things around in a day or a month, we can always begin by making small changes that gradually add up to big ones. The key is to start. Do something. Move. Change.

That kind of sounds like the opposite of what I was saying with my fly analogy. If we try to aggressively swipe at the fly, we’ll often miss it. My tactic for getting rid of flies in the house is a little different. When I see the fly, I move to the nearest door and open it slightly. Then I just gently shepherd the fly out the door by standing in its way and keeping it from leaving the area. In the end, it’s probably better off outside anyway.

I know that sounds unbelievable, but it usually works. It keeps my son happy because he gets upset when we kill bugs in the house, and I don’t have to deal with the mess created by a squished fly. So, while taking aggressive action may not bring about the desired change, taking no action won’t work either.

If we approach entrenched problems with the same old canned solutions, it’s unlikely we’ll achieve the change we so desperately need. Gradual changes combined with patience and perseverence can sometimes lead to the epiphany that finally snaps us out of our stupor. Making some simple changes to your environment can be the first step to triggering this process.

Have you ever found that a change of scenery has had a profound effect on the way you look at things?

Related posts:

1. Can a Personality Quiz Change Your Life?
2. The Change Imperative
3. If You Can’t Change the World . . .

He didn’t tell me how to live; he lived, and let me watch him do it.

~Clarence Budington Kelland

If you’ve been following the story of our recent life changes, you know that we just bought a home about two and a half hours from where we live now in order to take advantage of a new opportunity even though it meant taking out a much larger home loan. When I last updated you, we still needed to sell our current home. We put the house on the market a couple of days after that post and sold it 5 days later.

Since this is a time of year when a lot of folks are looking to buy and/or sell a home, I thought some of you might be interested in how and why we sold our home so quickly. This is also the time of year when we think about the fathers in our lives, and there are a couple of fathers in my life who helped make selling our home a lot easier. Here’s the story:

First Impressions & Fascism

The real estate agent who helped us sell our home happens to be my Dad. He’s helped us out with all of our real estate transactions over the years and, like most Dads, he’s not short on catch phrases or clichés. And, like most clichés, the ones he shared with us are still around because they reflect tried and true wisdom. Two of them stand out to me:

1. “You never get a second chance to make a great first impression.”

2. “When people walk through your house, they’re not looking for a reason to buy it. They’re looking for a reason not to buy it.”

The implications, of course, are clear: Don’t give them any reason not to buy your house.

Well, fortunately (or unfortunately) Mr. Cents took these pearls of wisdom to heart. He was nothing short of dictatorial in his determination to polish and present our home as the jewel we all know it is. No crumb was left on the carpets, no faucet left unpolished, and absolutely no superfluous objects were permitted to appear on any surface. With three boys aged 16 and 12 in the house, you can imagine the “challenges” this presented.

Fortunately for my sons and me, my husband’s fascist regime was short-lived – unless you include the weeks we spent painting, washing walls and repairing the most minute faults imaginable before we put our home on the market. But guess what? It worked. Within 5 days, our house was sold.

Waiting for a Better Offer

During the course of the 5 days our home was on the market, we had about 7 formal showings as well as an open house that garnered quite a bit of traffic, especially considering that the weather was awful that day. But the couple who bought our home in the end was the first to go through it.

A lot of people have asked us “Why didn’t you wait for a better price?” I’ll give a few details below, but the real answer is just another one of my Dad’s stock sayings:

“Your first offer is often your best offer.”

Now don’t get me wrong. If the purchasers had offered only 75% of our asking price, we would not have accepted the offer. After a couple of counter-offers lobbed back and forth, we settled on a price that was a little more than 94% of our asking price. My Dad had told us that houses in our region had been selling for about 95% of the asking price on average, so we felt like we got a fair deal.

The offer we accepted had no conditions attached to it, so it carried some pretty sweet bonuses:

• We wouldn’t be stuck waiting around to see if the buyers sold their current home.
• The buyers didn’t need to get financing approval.
• No more house showings.
• We could immediately move ahead with plans for moving, preparing the new house and getting set up in the new city.
• The end of Mr. Cents’ Reign of Terror.

How to Sell Your Home in 5 Days or Less

OK. I couldn’t resist the cheesy subtitle. But seriously, selling our home this quickly was probably only partly based on luck. Regular readers know that I don’t believe in luck. I think we make our own luck.

In this case, Mr. Cents the Terrible made our luck. He forced us all to clean up our rooms, our closets and perhaps serendipitously, our acts. And he worked harder than any of us.

We learned that there really is a place for everything – even if it’s in the garbage. Just when we thought we had everything looking ship-shape, we were sent back to make it even better. Kicking it up a notch is my husband’s specialty. Here’s how you do it:

• Price your house right: Know your market. What are comparable homes selling for? What percentage of the asking price do they sell at?
• Every surface must be dust-free and shiny clean
• No cracks, dimples, or paint chips on the walls.
• No clutter – anywhere.
• Floors – clean, shiny, debris-free
• If you have an asphalt, stamped, or specialty concrete driveway, seal it
• Landscaping and lawn freshly manicured
• Kitchen – toaster, sinks and faucets shined; no dishes in sink or drying tray; counters wiped
• Freshly vacuumed floors/carpets/stairs
• Aged, marked, or damaged furniture is either tossed, repaired or temporarily exiled to a friend’s garage/basement
• Make sure your rooms look as spacious as possible. Temporarily relocating some items may be necessary.

If you still want to sell your home once you’ve got it looking this pristine, you’re ready to go.

Where’s the Champagne?

Leaving aside the fact that I don’t like champagne, we didn’t exactly celebrate the sale of our home. We thought we would. We had a bottle of “better” red wine tucked away for the occasion. Why no cork-popping?

For one thing, we were absolutely exhausted. In fact, I couldn’t even bring myself to write a single word about the experience until a few weeks after the fact. For another, Mr. Cents’ uncle lost his short battle with cancer around the same time. For another, we were also really grieving the loss of this house.

We chose every tile, fixture and paint colour in it. We designed our unique driveway and landscaping. Our sons went from ages 8 and 4 to 16 and 12 while we lived here. This is home.

On the financial side the house we bought, which is (at least to us) inferior, will end up costing us about 40% more because of the area it’s in. After coming within a hair of paying off our mortgage, that’s a tough pill to swallow. And yet, the new city offers the potential for much higher income. [Sigh.]

That leaves me wondering about home. What makes a home? While I love the look, layout, and feel of our current home, I know that when I was out of town looking at other homes, it wasn’t the brick colour I missed. It was one son’s latest hippie rant. It was another’s hilarious (if slightly nihilistic) life observations. It was the third’s smiling face and breathless stream of news.  It was sharing a meal and some music. It was family. I guess that’s home.

To all of you: I hope you get a chance to ponder the unique gifts the fathers in your lives have given you.

To Dad and to Mr. Cents: Thanks for letting me watch you work. Happy Father’s Day.

Comments on real estate, home, and fathers are welcome.

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Tell your money where to go. Don’t ask where it went.

~ Unknown

We spend a lot of time here kicking around different ideas on how to manage your money. What’s the best way to spend it, save it, and invest it? It’s all about controlling your money rather than letting it control you.

From the beginning, I intended the “balance” part of Balance Junkie to be a bit of a double entendre. It refers to the quest for a healthy financial balance sheet as well as a well-rounded life balance sheet. Putting money in its place means paying enough attention to it to manage it wisely, but not enough to let it become more important than it is. Today we take a look at how to balance these dueling propositions.

Your Money: Micro Management

The term micro management usually has negative connotations. It implies that we’re paying too much attention to details. That can definitely be a problem in personal finance. Sometimes we get so determined to do the right thing with our money that we forget the reasons we took up the challenge in the first place.

Still, letting the pendulum swing too far in the other direction isn’t such a great idea either. Just like letting our closets, desks, or kitchens become too messy can impair our quality of life, neglecting basic financial maintenance can allow problems to needlessly creep into other areas of our lives. Financial maintenance at the micro level can include the following:

• Track Spending: use a pen and paper, spreadsheet or software program. It doesn’t matter. Just know where your money is going. Whether you track it to the nearest dollar or hundred dollars isn’t as important as just doing it.
• Budget: Once you understand where your money is going, it’s time to control the flow. Can you increase your income? Can you cut back spending in some areas and redirect that capital to something you value more?
• Saving: Paying yourself first has almost become a cliché in the personal finance realm, but it’s still one of the best ways to reduce money stress.
• Investing: Now that you’ve saved some money, why not put it to work for you? We debate here all the time on the best way to do that. Regular readers know that I think there are lots of ways to create a balanced portfolio. Your way is the best way, whether you’re invested in a Bank CD or a growth stock. As long as your net worth chart is more or less headed higher, the rest is irrelevant. There’s a great asset allocation plan out there somewhere for every personality type you can imagine.
• Retirement Planning: One of the main reasons to keep on top of your financial progress is to make sure you’ll have enough money saved to support yourself once you decide to stop working – or are no long able to work – for income. As my friend Jim Yih says, saving for retirement is simple, not easy. Most people who are close to, or in retirement say that the one thing they regret in terms of retirement savings is not starting sooner. If you haven’t started planning for your future already, now is the best time. If you’re Canadian, look into RRSPs, TFSAs and any pension plans your employer might offer.

Strategies for spending, saving, budgeting and investing are a dime a dozen, especially since the dawn of the internet. The hardest part can be finding the one that works for you and making it into a habit. You’ll know you’ve found it when you realize you’re thinking a lot less about money and a lot more about the people and pursuits you value more than money.

Should you learn as much as you can about your money options? Sure. Read all the good books. But once you’ve learned what you can, don’t be afraid to toss out the rule books and write your own.

Your Money: Macro Management

So you’ve basically automated a few strategies for looking after the important minutiae of your financial life. Don’t forget to pull back and look at the BIG picture now and then. Money isn’t everything. If it wasn’t required to buy food and shelter, it wouldn’t be anything. Like everything else, it carries only the value we ascribe to it.

Money has no intrinsic value. It’s just the tool we use to gain some of the things that do. While it’s really important to put money in it’s place in terms of allocating it to the goals we value the most, it’s also important to put money in it’s place in the context of our overall lifestyle. Where does money fit into your life? Do you think it takes up too much space, not enough, or just the right amount?

Here are a few signs you may have let the balance swing too far in favour of micro managing your money:

• You’re forgetting important dates like birthdays, anniversaries, and holidays.
• You’re always thinking about money and how to get more of it.
• You think that if you just tweak your portfolio one more time, you’ll be set.
• You’re exhausted from putting in extra time at work to earn more money.
• You haven’t enjoyed one of your favourite pastimes in over a month.
• You’re not happy.

Of course, the list above is only slightly tongue-in-cheek. I’ll just offer a quote I’ve used before. It’s one of my favourites and it always reminds me that if I’m not happy with the way things are, I can take action to change them:

You’ve got a lot of choices.  If getting out of bed in the morning is a chore and you’re not smiling on a regular basis, try another choice.
~Steven D. Woodhull

I write about money every week. It’s easy for me to become too focused on the micro picture. I have to make a regular and very conscious effort to remind myself that I started writing about money to help people master it enough to forget about it for awhile.

Do you ever find yourself micromanaging your finances? How do you get yourself to put things in perspective and take a more macro view?

(By the way, I found today’s opening quote via Natalie MacLellan, who tweets for the Nova Scotia Securities Commission @B4UInvest. I’m not sure where the quote originated so if anyone knows, please send me a note so I can give it proper attribution. Thanks Natalie! )

Photo Credit: Shutterstock

Related posts:

1. Are Money Market Funds a Good Place to Park Your Cash?
2. What Is Money?
3. Does Money Reduce Stress?

Opportunities fly by while we sit regretting the chances we have lost, and the happiness that comes to us we heed not, because of the happiness that is gone.

~Jerome K. Jerome, The Idle Thoughts of an Idle Fellow, 1889

Whether you’re talking about your investments, your view on the economy, or your approach to life in general, your conclusions, actions and results usually hinge on your perspective. I’m often amazed at how different people view the same situation in very different ways. I’m even more amazed by how slight changes in how we look at things can literally change the course and quality of our lives.

Last week I promised to fill you in on what’s been happening with our life changes. (If you’re not familiar with the background story, take a look at Risk Is Relative.) We bought a home in a new city last week. We’ve spent a lot of time over the past two months looking at houses and weighing options, but this transaction happened really fast.

We were originally going to move to a very small town about 2½ hours away from here. Gradually, we came to realize that this probably wouldn’t suit us as well as we thought. We liked the idea of a simpler life, but couldn’t fathom the thought of driving 30 minutes or more to reach major shopping areas. Apparently, we’re city slickers at heart.

The home we bought is only about 2 years old. It’s pretty nice, but the truth is that we had to act on it so quickly in order to secure it that we didn’t have much time to scout out the area. We know that the city is centrally located in Ontario, so that will be great for the new business. Other than that, we’re kind of going in blind.

We don’t take possession, however, until mid-August (the closing date is actually on our 19th wedding anniversary!) so we’ll have plenty of time to investigate. Now we need to concentrate on selling our existing home.

Opportunity Cost

According to Wikipedia, opportunity cost is “the cost of any activity measured in terms of the best alternative forgone.” It’s a key concept in economics and investing, but it can also play an important role in just about any life decision. When we decided to move in order to have the opportunity to maximize the potential benefits of my husband’s new job, we had to weigh some pretty serious opportunity costs:

1. Housing Cost: Our current home is located in an area where housing is relatively inexpensive, whereas our new home is in an area where housing is more costly. Our current home would probably be worth about $175,00 more if it were located in the city to which we’re moving. We love our current home, so it definitely hurts, both emotionally and financially to pay more for less in order to make this move.
2. Emotional Cost: Because we chose every aspect of our current home and we’ve lived here longer than any place we’ve been before, it’s really hard to let go. This house is truly home. In addition, we will be leaving the city where both of our parents live. We had hoped to be close by as they age. The boys will be leaving long-time friends and starting at new schools as well.
3. Financial Cost: As mentioned above, the new home will cost significantly more than our current home, and we will still have to finish the basement to bring it even close to our current home in terms of space and comfort. Our existing home is almost paid off, and the new home will mean that my mortgage vendetta will be extended. This will also have implications for our budgeting and retirement planning as paying off the mortgage was going to accelerate our retirement savings significantly.

Wow. After writing that, I’m starting to wonder if we’ve made the right choice. But let’s look at the potential benefits of the move in terms of the opportunity cost of NOT moving.

Opportunity Lost

“Opportunity is missed by most people because it is dressed in overalls and looks like work.”
~Thomas Edison

Change is at least a little scary for most people. For some – myself included – it can be downright paralyzing. I tend to play it extra-safe, but I’m married to someone who’s always pushing me to at least look at the benefits of taking the occasional leap. I’m not afraid to leap either, but I usually like to think about it a lot longer first.

My arguments for staying here are outlined above in the section on the opportunity costs of moving. However, I can also make a pretty good case for the opportunity costs of staying put:

1. Financial Cost: If we choose to stay in our current city, the new business would be much more difficult to run. Mr. Cents is responsible for getting a new division of the company off the ground in Ontario. It’s essential that we’re more centrally located to do that. If we do this right, we could easily make this thing a huge success and benefit from the income that goes with it as well. The new mortgage could then be dispatched very quickly, and our retirement plan, turbo charged.
2. Emotional Cost: Aside from the proximity of family and friends, we don’t exactly enjoy the city we live in right now. The new city is closer to some of the cultural and intellectual action in Ontario and we think this could be a good thing for our two musically inclined sons. There are plenty of post-secondary opportunities in the area if they choose to go that route. In addition, one of my sisters lives just a half-hour drive away, so our youngest son will get to visit with his cousins (who are closer to his age) a lot more often.
3. Lifestyle Cost: We’ve been so preoccupied with finding a new city/house that we haven’t devoted as much time to getting the business off the ground as we’d like. Having said that, Mr. Cents is loving the work so far. This is basically the ideal job we’ve been hoping for since he left his other position in 2008. We can both work on the business, but I have the freedom to concentrate on home (and Balance Junkie!) as well.

Perception is Nine Tenths of Reality

Every exit is an entrance somewhere else.
~Tom Stoppard

Doors are funny. Do they keep stuff out, or keep you in? Is a door an entrance or an exit? It all depends on where you’re standing and where you want to be. Do you want in or out? Perception is everything.

Obviously, we have decided, somewhat reluctantly, that we  want out of our current life and are hoping that the new life we’re entering is to our liking. We understand that there are opportunity costs whether we decide to stay or go, but we’re willing to take the chance that the risks outweigh the rewards. We’re choosing to risk some opportunity costs to avoid an opportunity lost. There are no guarantees either way, but we think we can make this work for our family.

Do you weigh the opportunity costs when you’ve got a choice to make? Do you ever find that the prospect of change keeps you from making a choice?

(Photo Credit: Norma Cornes/Shutterstock.com)

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2. Myth Posts and the Lost Art of Debate
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Obstacles are like wild animals. They are cowards but they will bluff you if they can. If they see you are afraid of them… they are liable to spring upon you; but if you look them squarely in the eye, they will slink out of sight.

~ Orison Swett Marden

Do you have financial goals that you just haven’t been able to achieve? Maybe you’ve always wanted to set up a budget, but you just haven’t found the time. Maybe you want to learn more about investing or economics, but you just don’t know where to start. Before you know it years pass by, you’re no closer to your goals and you’re left wondering why.

All of us face different financial obstacles. Some of us have a hard time figuring out how to earn more income. Others have plenty of income, but struggle to save it for the future. No matter what financial obstacles I’ve ever faced, I usually find the causes for them – and the keys to hurdling them – in the mirror.

Mirror, Mirror . . .

If you’re anything like me, you have a few nagging concerns that flare up once in a while. You acknowledge that something has to be done about them, but somehow nothing ever happens. Why?

Financial concerns can sometimes take a back seat to the everyday problems that crop up. I need to plan and prepare meals for my family every day, but there’s no immediate pressure to figure out the best investment or retirement strategy for the future. After all, retirement is decades away, and dinner is hours away. And by the time dinner has been planned, prepared and put away, there are plenty of other tasks to occupy my time. So it’s easy to put off financial planning.

It’s even easier to repeat the pattern above over and over until years pass without any progress toward my financial goals. I can see that the problem here is me. If I want these patterns of behaviour to change, I have to change them.

I’m no expert at listening to the mirror on the wall, but I’ve gotten a little better at it over the years and I’ve found that facing obstacles head-on is the only way to overcome them. Half-hearted efforts always yield half-hearted results. An honest, realistic appraisal of your goals and your efforts to achieve them is critical to your success.

5 Steps to Hurdling Financial Obstacles

The follow 5 steps can provide a framework for how to overcome the financial inertia that besets all of us from time to time. But it’s important to realize that, like any good athlete, we need to make sure that we’ve got the basics covered first: You can’t jump all those hurdles and win the race if you haven’t taken care of your basic health needs first.

It’s the same with your financial health. Take a look at Your Financial Hierarchy of Needs and figure out which part of the pyramid you need to focus on before you try to clear all of your  financial hurdles. You can follow these 5 steps for each hurdle and hopefully they will eventually become second nature.

1. Name It

This may sound too simple or obvious, but I’ve often found that I’m a lot less successful when I skip the most fundamental aspects of problem solving. When you name your obstacle, you provide a focal point for your efforts. Try to be specific, yet fairly general with your name. You may want to name  your obstacle “budgeting”, but it may help you focus better if you call it “designing a useful budget spreadsheet” or “sticking to my budget.”

2. Source It

The next step is to identify the source of your obstacle. Do you need more information to clear your obstacle, or is it more a matter of motivation and consistency? Maybe it’s a little of both. Either way, identifying the root of your problem allows you to focus your actions where they’ll be most effective.

3. Size It Up

This is where you can go into a little more detail on your obstacle analysis. You’ve named it and estimated some of its sources and now you need to decide just how big that hurdle is. Do you need to break it down into smaller pieces in order to clear it effectively, or can you get over it in one big jump? If you’ve never designed a budget before, you definitely want to break the process into smaller steps like researching different types of budgets, tracking your spending, and monitoring your progress.

4.  Face It

This is where the running shoe meets the track. It’s time to come up with a concrete plan of action for hurdling your obstacle. Staying with our budgeting example, you may want to set aside a specific time on a weekend to do some research or go through your bills and financial statements. Give yourself a firm but flexible deadline like the end of a month or week. Set your own pace, but make sure you have a clear end in sight.

5. Jump It

This is the best part. Once you follow through with your plan of action, you can take a long drink of water (or another beverage of your choice ) and savour your victory. It’s important to realize, however, that we don’t get over every hurdle on the first try. Don’t quit. Go back to the starting gate and go at it again. You may need to modify your preparation and approach, but you’ll get over that obstacle eventually.

Do you have any financial obstacles you just can’t seem to clear? How do you approach them?

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3. 5 Financial Toxins and Antidotes

No one can get inner peace by pouncing on it.

~ Harry Emerson Fosdick

I’ve been pretty stressed out lately over our impending move and all of the uncertainties surrounding it. In fact, I went down for the count last week with some kind of flu virus that was, I’m pretty sure, not unrelated to the recent upheaval in our lives. I’m sure a lot of people would deal with this stuff a lot better than me, but I’ve never been a person who enjoys sudden changes. I need time to digest things.

Just to give you a quick update, we’re planning to move to a new town about two and a half to three hours away. We were going to build a new home with hopes of moving in before school starts in September. We’ve been going back and forth with the builder’s real estate agent for about a month now with various house plans.

We were taking up a lot of our time with the planning and the real estate agent was often slow to respond. We were becoming more stressed out about the deadline and the prospect of making the thousands of decisions involved in building a new home – all while we’re trying to get a new job/business off the ground.

Boiling Point

When  I got sick last week, that put even more pressure on Mr. Cents to take care of things regarding the new house and the new job, not to mention all of the regular tasks related to running a household that I normally handle. He was great, putting together some impromptu meals for the boys and doing what he could to help with the laundry and other tasks. I felt terrible knowing that he really didn’t need any more stress at the time.

Both of us are pretty organized people who like to have a grip on how our lives turn out. Building a new home in another city is not conducive to that. So we decided to scrap that idea and look at the resale market. We drove to the new town on Friday to look at a few homes and unexpectedly found one that didn’t exactly fit our parameters, but would be an excellent, functional home.

We ended up putting in an offer on that house the same day, but found out the next evening that another offer was successful instead. So now it’s back to the drawing board. We recently started joking about becoming homeless. That was the boiling point. At that moment, I realized that my stress level had moved way out of line with reality.

Homeless? That’s ridiculous. Technically, we don’t have to move now. If we needed to wait a year, we could do that. In the meantime, we are living in a home we love. The mortgage will be paid off by the end of the year. The kids would rather not have it drag out that long, but if we can’t find the right house, we may not have a choice.

Lessons Learned

We feel a little more relieved now that we’ve decided not to build a new house, although I’d be lying if I told you my stomach isn’t still full of butterflies. Still, I’ve learned a lot from this experience so far and I’m amazed at how life often teaches us the same lessons over and over again – or maybe I’m just a slow learner.

Here are a few ways to handle financial stress:

• Know Yourself: Everyone deals with stress differently. My husband and I are kind of control freaks, so we eliminated some of the uncertainties of our situation by electing to buy an existing home rather than building a new one. Others might relish the thought of choosing every detail of a new home, but we’ve done it before and we just aren’t up for tackling it again, even if it means compromising on some of the items on our wish list.
• Take a Deep Breath: It’s so easy to get wrapped up in trying to make sure everything turns out perfectly. Sometimes it’s better to back off and let things play out. You can be prepared without being obsessed.
• Put Things in Perspective: How serious is your situation? What’s the worst case scenario? Is it as bad as you thought it was? Be realistic about your financial conditions.
• Act, but Don’t Overreact: If you find yourself worrying about your finances, it’s important to formulate and act on a plan to eliminate your concerns. If you allow yourself to be overwhelmed by the situation (as I did) you can become paralyzed. Take it one step at a time and do your best to control what you can. Keep a few alternate plans in your pocket as well. Anything can happen.
• Be Patient: You can be prepared, but you can’t control everything. Sometimes you just have to wait to see how things progress. In the meantime, pressing the panic button at 30 second intervals won’t help anyone.

Wow. That sounds like pretty good advice. Now if only I could get myself to follow it!

How do you handle financial stress?

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1. Does Money Reduce Stress?
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To be nobody but yourself in a world which is doing its best, night and day, to make you everybody else means to fight the hardest battle which any human being can fight; and never stop fighting.

~e.e. cummings, 1955

Update: This article was selected for the Best of Money Carnival – 10 Investment Lessons Edition posted at The Dividend Guy, as well as the Carnival of Money Stories #92 posted at Sweating the Big Stuff. Thanks!

Have you ever taken an online personality quiz? There are all kinds out there. My son recently made me take one related to an online video game to determine what type of wizard I might be. Guess what? I was a Balance Wizard. Who’da thunk it?

Normally, I roll my eyes at these tests. Most of them are just for fun. But what about the “real” personality tests? Back in university, I took quite a few psychology courses and I always found the study of personality to be fascinating. At the same time, getting into the nitty gritty of personality testing taught me to regard any standardized test with a healthy dose of skepticism.

Still, I took a condensed version of a famous personality test a little over a year ago and I can honestly say that it had a profound effect on me. Shortly thereafter I started Balance Junkie, even though I was am a technological dunce. This article is about that test.

MBTI Questionnaire: What Can It Really Tell You?

“All my life I had been looking for something, and everywhere I turned someone tried to tell me what it was. I accepted their answers too, though they were often in contradiction and even self-contradictory. I was naïve. I was looking for myself and asking everyone except myself questions which I, and only I, could answer. It took me a long time and much painful boomeranging of my expectations to achieve a realization everyone else appears to have been born with: that I am nobody but myself.

~Ralph Ellison, “Battle Royal”

If you took an introductory Psychology course in school or have been through a career suitability assessment, you’ve probably heard of the Myers-Briggs Type Indicator. It’s one of the most well-known and trusted personality inventories out there. To have it administered by a trained professional usually costs several hundred dollars. Is it worth the expense? What can you really gain from one of these tests?

Before we delve into those questions, let’s take a quick look at the structure of the inventory. By answering a relatively lengthy questionnaire, the MBTI aims to determine where you fit in on 4 key areas of preference. Each one describes a dichotomy, and you will land somewhere on a continuum between two extremes. This yields 16 possible personality types. The 4 areas of preference look like this:

Favourite World: Extraversion (E) or Introversion (I)

Do you prefer to focus on the outside world, actively engaging with your environment and other people? If so, you’re an extravert and you get an “E” on this part of the scale. If you’re more comfortable exploring your own inner world, you’re an introvert and you will be in the “I” camp.

Information: Sensing (S) or Intuition (N)

Do you prefer to take in information from the world “as is”, or do you need to interpret and add meaning to it? If you’re in the former group, you are an “S” for sensing. If you’re in the latter, you’re an “N” for intuition.

Decisions: Thinking (T) or Feeling (F)

If you fall into the “T”, or Thinking group, you prefer to make decisions by looking at logic first. If you’re an “F”, or Feeling person, you look at people and special circumstances before you make a choice.

Structure: Judging (J) or Perceiving (P)

People who are in the “J” (Judging) category like to have things settled. People who score higher on the “P” (Perceiving) end of the dichotomy prefer to stay open to new information and options.

You can take a free, shorter adaptation of this quiz at Human Metrics. It’s not as complete as the full inventory, but it may still give you a good idea of your type. Once you have the 4 key letters, I would encourage you to explore different descriptions of your type and see how the information might help you in your career, your personal finances, and your life.

It’s important to note that no type is better than the others. If you look at the diversity here, you can see why humans argue so much – and why we’re also capable of astounding achievements when we work together.

Who Cares?

“Be what you are. This is the first step toward becoming better than you are.”

~Julius Charles Hare

While a lot of this stuff is pretty interesting, some of you may be wondering how it can really help you in life or in finance. After all, by the time we reach our mid-twenties or early thirties, don’t we have a pretty good idea of who we are, and where our strengths and weaknesses lie? Yes, no and maybe.

It depends on where you’re at. Some people are naturally very self-aware. Some don’t really become comfortable in their own skin until they’re much older. Some may never get there.

These tests are often used to help people choose a career that fits their personality type or by corporations that are looking for employees who are a good fit for their organization. Those are two very practical applications, but I would take it a step further. A true understanding of yourself has vast implications for all areas of your life, including the way you perceive and manage money. That will be the subject of future articles. For now, let’s take a look at how taking a personality test affected one person.

Case Study: INFJ

“It takes courage to grow up and become who you really are.”

~ e.e. cummings

I know of one rather extreme introvert who found that taking the Human Metrics test was extremely informative. Reading various descriptions of the type it generated provided real insights in spite of the fact that this person was quite self-aware. Some of the idiosyncratic traits of the type were so accurate that it was nothing short of uncanny. She found that her type (INFJ) is the most rare of the sixteen, with less than 1% of the population in this group.

Although this person almost never had enemies growing up, she also had very few friends, with just a small group of trusted companions. While she didn’t dislike people in general, she was usually less than impressed by “the crowd.” She was more than happy to stand outside of it most of the time. I guess that feeling of being on the periphery would start to make a lot more sense if you suddenly learned that it wasn’t your imagination – that you really were just a bit different than the majority.

More importantly, this person learned that it was OK to be that way; that she, like every other person, could still contribute – and maybe even had a responsibility to do so. Balance Junkie is just one INFJ’s attempt to contribute.

Did you take the test? Did you gain a new perspective on yourself? How will you use that information?

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We spend January 1 walking through our lives, room by room, drawing up a list of work to be done, cracks to be patched.  Maybe this year, to balance the list, we ought to walk through the rooms of our lives… not looking for flaws, but for potential.

~Ellen Goodman

Update: This article was included in the Totally Money Blog Carnvial #3 posted at Budgeting in the Fun Stuff as well as the Wealth Builder Carnival #25 at My Wealth Builder. Thanks!

Have you ever heard of The January Effect? It’s basically a piece of market folklore that gets mentioned each New Year, with updated performance statistics. It usually comes with an endless debate about whether it’s an actionable piece of information or something more akin to a stock market ouija board.

I’ve heard of a few slightly different variations on The January Effect, but most of them refer to the tendency of the stock market to rise between the last trading day of the departing year and the fifth trading day of the New Year. Some say that the trend of those key trading days will tell the tale of the tape for the remainder of the year – except for the few years when it doesn’t.

The main reason given for The January Effect is that tax loss selling in December drives prices down a bit, providing an attractive entry point for investors and funds looking to put that money back to work in the New Year. Some have speculated that this effect isn’t as relevant anymore, since many investors hold their retirement savings in tax sheltered vehicles, eliminating the need for tax loss selling.

In Canada, however, the existence of one such tax sheltered vehicle may actually add to The January Effect. In January the RRSP contribution deadline is just a couple of months away and people are starting to get a feel for whether or not it might be a good idea to make an RRSP contribution in order to get a tax break for the previous year. (The RRSP contribution deadline for 2011 is March 1st by the way.)

The Real January Effect

The January Effect does work a good part of the time. But I find that the most reliable and lucrative January trend in personal finance is the need to get organized. As I mentioned in a recent article on Setting Goals for 2011, I can be the biggest organizational basket case in December, but somehow manage to turn it all around in the first couple of weeks of January. (I have yet to master the trick of getting that to carry straight through to the following December. )

The need for a fresh start at the beginning of a new calendar year is something many of us thrive on. It’s a time to set new priorities and look for opportunities we might have overlooked in the past few months. Revived by the break from routine that the holidays provide, we can look at our life and our personal finances with a fresh set of eyes.

10 Ways to Improve Your Finances and Your Life in 2011

If you have yet to take advantage of The Real January Effect, or you’re finding that you’re kind of immune to it, here are 10 actions you can take to improve your finances and your life as we open the book on 2011:

1. Track Your Expenses: If you’ve never tracked your expenses before, this is probably the number one thing you can do to improve your finances today. You can’t maximize your money if you don’t know where it’s going. If you’re a veteran expense tracker, you might want to update your numbers for 2011, taking into account rising food and energy costs.
2. Set Up a Budget: You don’t have to have the perfect budget and it doesn’t need to be set in stone. A good budget is simple and flexible. The best budget is the one you use. You shouldn’t feel guilty every time you look at it. You should feel empowered. Budgets are, by definition, a work in progress. Expect the unexpected.
3. Organize Your Files: If you don’t yet have a filing system that organizes your bills, receipts, pay stubs and tax related information, now is the perfect time to set one up.
4. Review Your Investments: How did your savings and investments perform last year? Are you happy with your asset allocation? What’s on your shopping list for 2011? How’s your retirement plan looking?
5. Clean Out your Desk: If you have a desk or workspace where you perform you personal finance tasks, clean it up. A clean desk really can help clear your mind and focus your attention. (I need to do this more than once a year.)
6. Centralize your Financial Information: What would happen to your finances if, heaven forbid, something happened to you tomorrow? Would those left with the responsibility of sorting out insurance, bank accounts, investments and dozens of associated passwords know where to start? No one wants to think about this, but organizing your financial life is one of the greatest gifts you can give to your loved ones.
7. Set Some Goals: You don’t need a lot of them, but a few key targets can help us focus our attention in an era when we’re being pulled in so many different directions.
8. Turn Off: Take some time each day to disconnect – from responsibilities, gadgets, and noise. You’ll be amazed at what you hear when it’s really quiet.
9. Search for Imbalances: Is there something that’s been bothering you that’s not quite right? Sometimes these things nag at us throughout the day, but only become clear once we’ve turned off. What steps can you take to restore balance?
10. Maintenance Mechanism: Put some kind of system in place that makes it easier for you to follow through on these principles and update them regularly. It could be a reminder in your organizer, or a commitment to write out your goals and revisit them once a week, once a month or even everyday if you really want to form a habit.

The maintenance mechanism has been a real stumbling point for me. So far, I haven’t found anything that works for more than a month or two. I’m trying again this year, but I’m starting to see that raw commitment and some genuine frustration with the status quo are more effective than clever tips and tricks.

I’m not sure whether you find yourself more willing and able to get organized in January, but I’ve found that the urge to purge comes like clockwork on January 1st of each year. I’d rather invest that trend than in stocks as indicated by the traditional January Effect. I’ve found it pays great dividends each and every year.

Has The Real January Effect worked its magic on you yet? Do you have any ideas to share?

(Photo Credit: Feng Yu)

Related posts:

1. 20 Cents from January 2012
2. 20 Cents from January 2010
3. 20 Cents from January 2011

Get me through December
A promise I’ll remember
Just get me through December
So I can start again

~ from the song “Get Me Through December“

Markets and economics, like life, move in cycles. The only sure thing about a very long up or down-swing is that it will inevitably reverse. December is a time when neither markets, economics or our lives may necessarily be at the peak or bottom of their cycles, but the end of the calendar year still makes us reflect on where we stand on all three.

The holiday season only adds to that effect. We (hopefully) have some time to see friends and family we may not see throughout the rest of the year, and take some time to stop and reflect on the year that was and the year yet to come. December finds many of us a little weary from the events of the preceding 11 months (and perhaps from Christmas preparations and socializing).

Some of us look forward to this time of year, not only as a chance to catch up with family and friends, but to catch our breath and get a fresh start in the New Year. If you’ve had a rough year, you can take a look at whether you had any control over that outcome, and plan to hit the restart button. If you’ve had a great year, you can look at ways to do more of what’s working and store away some reserves for the coming year.

Kondratieff Winter

I’m not sure if you’ve ever heard of Nikolai Kondratieff, but he is known for coming up with a very long term theory on economic cycles. December is a great time to look at the BIG picture. We’re talking generations, not years here. An updated model of the theory, proposed by Ian Gordan of Long Wave Group, proposes a cycle of four seasons. Here’s a quick summary of the characteristics of each season:

Spring

• Follows a “winter” season that includes a depression
• Gradual increase in business activity, interest rates, employment, and consumer confidence from very low levels
• Stock prices begin a slow rise and reach a peak at the end of spring

Summer

• Massive increase in money supply leads to a burst of inflation that peaks near the end of summer
• Gold and interest rates rise rapidly and peak at the end of summer
• Stock market under pressure and ends summer with a bear market low

Autumn

• Massive stock bull market financed by fiscal and monetary stimulus
• Euphoric peak in stock prices signals beginning of winter
• Inflation and commodities prices fall
• Real estate peak at the beginning of winter
• Gold in bear market, but lows hit as winter begins
• Debt reaches astronomical levels by end of autumn
• Soaring consumer confidence due to elevated real estate and stock prices, and plentiful jobs

Winter

• Stocks begin major bear market
• Debt becomes a dirty word
• Banking crisis
• Credit crunch – interest rates rise
• International currency crises
• Gold rises as deflation takes hold

This information and much more can be found in this chart:

(Click on the chart for a really big version)

The whole 4-season cycle lasts 50 – 70 years and we are currently in the 4th full cycle since the early 19th century. As you can see, we are currently experiencing winter. At first glance, that might seem a little depressing. But guess what? Once we’re through winter, we get to start again.

Your Life Cycle vs. the Kondratieff Cycle

This longer cycle dynamic brings home the point that where you are in your life cycle compared to the larger economic cycle matters. If you put most of your money to work in the summer and autumn and you just happened to enter retirement as the first winter blast hit, you probably wouldn’t fare very well. This is not hypothetical. A good number of people are actually in that leaky boat right now.

On the other hand, if you’re in your 20s now, you may be entering a really great period of time to be a long term investor. You will likely be entering your prime investing years during spring. The key will be to recognize when the leaves start to change and make the appropriate adjustments.

Using December Wisely

This reflective holiday season is the perfect time to take a look at some of these big picture issues. Take some quality time to assess and reassess your goals, and set a course for the New Year. It’s healthy for your portfolio, for your wallet and for your peace of mind.

With all of that said, I’d like to wish each of you a very Merry Christmas and all the best for the New Year. I’m taking some time off to stop and reflect, but I’ll be back in January with some fresh perspective for you. In the meantime, I wish you peace during this holiday season and I hope the coming year brings you prosperity – whatever that means to you.

Do you find yourself feeling a little more reflective as the year draws to a close?

Related posts:

1. 20 Cents From December 2009
2. 20 Cents from December 2010

If you can’t change the world. Change yourself.
And if you can’t change yourself then . . . change the world.

~ The The, from the song “Lonely Planet”

I’ve spilled a fair number of pixels laying out why I think the extend and pretend monetary policies of the past few decades have been a mistake. You would think that strongly opposing many of the ideas that have guided western culture over the course of my lifetime might make me cynical at the least, and bitter at worst. Not at all.

While I’ll admit to feeling occasionally frustrated about some of these things, I can’t say that any of them cause me to lose sleep or feel too negatively about the world we live in. Why?

Context Is Everything

I can’t change what’s happening out there, but I can change my reaction to it. Here are a few of the reasons why I’m able to accept the current zeitgeist even as I hold to values that are completely contrary to much of its thinking:

1. These policies are facts of reality. I can’t change them. I’m not willing to sacrifice my peace of mind or my health by spending my valuable time and energy stewing about them.
2. These ideas have been sanctioned by the majority of society. (I’m happy to live in a democracy.)
3. There have been lots of financial crises. Not coincidentally, many have occurred over the past 40 years. During my childhood and teen years, I was completely oblivious to all of them, so maybe they weren’t so bad after all. Maybe ignorance really is bliss.
4. I could be wrong. Who knows? Maybe the Fed really can continue to print money and inflate bubbles forever without causing “The Big One.”
5. I do worry that the failure of these policies could have harmful effects on my family’s quality of life, but I’m grateful that they (for the most part) haven’t yet. I’ll continue to savour experiences with the people I care about in the meantime.
6. While I can’t change these policies, I don’t have to support them by buying into these asset bubbles. (But I don’t begrudge those who do want to take advantage of the money-printing no-brainer trades that are out there. )
7. We have a plan in place that spells out how we’ll react to any sharp economic changes, whether it’s income reduction, a sharp rise in interest rates, continued low interest rates, or unforeseen expenditures. These measures won’t eliminate the damage that some of these events might cause, but they will hopefully minimize it, or at least prevent us from panicking into poor choices.

You Can’t Fight the Fed, But . . .

Here’s how one astute commenter on QE Collateral Damage (Rachel from MomVesting) summarized the Fed’s policy actions: ‘Clearly the thinking on any kind of “stimulative” effect, is to avoid the paradox of thrift. One great way to do that is to punish the savers. “Don’t want to put your money into our equities or real estate? Fine, watch it turn to cat food.”’ OK, so maybe Ben didn’t put it that way, but that’s essentially what the policy is saying. It’s trying to coax folks like me into equities and other asset classes.

My response to Ben? You can’t make me. Yes, I realize that’s juvenile, and that I may be cutting off my nose to spite my face. But the fact is, I don’t like being manipulated. I don’t want to invest based on monetary policy. I want to invest in entrepreneurs who offer products of real value to society. (Insert foot stomp here.)

Another fact is that the Fed’s policy relies on traders buying into the “Don’t fight the Fed” mantra. What if they didn’t? Many of the traders I’ve heard comment on this policy say that they don’t believe it will work, but that they have to stick to the textbook trade: Buy gold. Buy stocks. Short the U.S. dollar. If traders decided en masse to fight the Fed, the policy would be dead in the water.

If You Can’t Change the World. Change Yourself.

So I may not be able to change the current policy direction, and I may be watching my savings turn to cat food for a while as a result. I can’t control the policy, but I can control my reaction to it.  I’m not allowing it to harm my overall quality of life. I can still enjoy a fall walk and weekend dinners with the boys. I don’t have to dwell on my opposition to the status quo, or allow it to bring me, or those around me, down.

And if you can’t change yourself then . . . change the world.

I haven’t allowed my adaptation to the current reality to change my underlying values either. I’ve made trade-offs that I’m comfortable with. There are some things I won’t change. If a lot of people decided not to buy into the extend and pretend package all at once, then maybe the world would change. Maybe that will happen. Maybe it won’t. Either way, I can sleep at night. I’ve found a nice balance between changing myself and changing the world.

I’ll leave you with a few more lines from the song:

I didn’t care if the sun didn’t shine
& the rain didn’t fall from the sky
I just cared about myself.
From this world to the next
And from the next back to this.
By our actions we are bound.

Do you think it’s more important to go with the flow, stick to your principles, or try to do a little of both?

Related posts:

1. The Change Imperative
2. Can a Personality Quiz Change Your Life?
3. Climate Change Can Be Positive for Your Life

The aim of an argument or discussion should not be victory, but progress.

~Joseph Joubert, Pensées, 1842

Who doesn’t love a good myth post? They seem to be everywhere, and guaranteed to elicit clicks galore. The minute you see a title like “10 Myths about . . .”, on financial blogs and you are compelled to read on. I know I am.

Before we delve into this further, let’s take a moment to look at what a myth really is. For many people, the word myth conjures up images of Greek gods and heroic tales. It can also refer to ideas that are considered to be as unrealistic as the existence of Zeus and Hades. Here are a couple of myth definitions from my trusty dictionary:

1.  a legendary story; fable
2.  a fictitious person, thing, or happening

So it looks like our common perceptions about myths are borne out by Webster. I think, however, that if we’re honest with ourselves, we might agree that the word myth has become a bit of a euphemism for lie. It’s often used to discredit the views of those who don’t share our beliefs. For those who don’t believe in religion, the Bible is simply another book of mythology. For those of certain religious beliefs, however, that perception might be viewed as wrong, blasphemous, or downright immoral.

Why Do We Love Myth Posts?

Recently, I’ve wondered what it is about these myth articles that draws us in. Here are a few ideas I’ve tossed around:

• We think we might agree that these 10, or 5 or whatever number of things really are myths and we look forward to a validation of our viewpoint.
• We think the author might be completely wrong, but we want to see what they have to say in case they make some good points. If not, maybe we’ll set him/her straight in the comments section.
• We’re afraid we might actually believe in some of these myths, and we want to make sure we find out if we’re holding onto some mistaken ideas.
• We harbour a slightly guilty sense of schadenfreude, looking forward to a good skewering of those poor souls who are foolish enough to disagree with us buy into these myths.

Nobody wants to be uninformed. There’s nothing wrong with that. Humans have debated innumerable issues over the centuries, ostensibly to arrive at the truth. Lately, however, I’m wondering if the purpose of some of these myth posts isn’t just to wiggle our fingers at the sides of our heads and stick our tongues out at those who disagree with us.

The Lost Art of Debate

Bret, the writer behind the Hope to Prosper blog, brought this up in the comments section of one of my posts (All I Need to Know about Money I Learned in Kindergarten) over at Money Crashers. Politicians, central bankers, CEOs, and everyday people seem more concerned with proving the other guy is wrong than advancing the debate toward a useful compromise. Personal attacks and rhetoric are the order of the day. Debating etiquette is apparently as obsolete as good manners and proper English.

The lexicon of popular culture is one of ego-defense. (Oh, that the “word” diss would just go away.) Whatever happened to a more enlightened society? Do we not have reams of research and thousands of structures, models and 10-step programs for conflict resolution? Has all of that psychological progress been ignored in favour of a regression toward schoolyard laws and a complete abdication of any sense of personal responsibility, integrity, or respect for others?

Chicken or Egg?

Does the garbage on television cause or merely reflect the current state (or lack thereof) of our collective values? Cheap shots, mindless arguing, superficial values, and a genuine disregard for truth, knowledge, and the human ability to take the high road used to be the sole domain of tabloid media. They have now become the norm in the halls of government, most entertainment genres, and even so-called news organizations.

I would like to think that the dumbing-down of society is nearly complete, and that the pendulum will soon swing the other way. It would be great to hear people respectfully state their case without being interrupted by a loud barrage of personal attacks and eye-rolling dismissals. It seems we have lost the art of listening right along with the art of debate, but both are essential if we are to solve the problems we face collectively.

How to Enjoy a Good Myth Post

I don’t mean to put down those who write myth posts. I may even write a couple of my own if the right topic presents itself. I just think we need to be careful about what we label as myths. One person’s myth is another’s truth. Sometimes authors use the myth label to put their own views forth as facts set in stone rather than what they really are: opinions.

The best myth posts challenge conventional thinking in a respectful way that is designed to seek out the truth rather than to nullify the beliefs of others. When reading these articles, try to bear in mind that just because someone has stamped MYTH across an idea, that doesn’t mean it really is one. Perhaps one day soon, antiquated concepts like intelligent discourse will return from the realm of mythology and take their rightful place in this new era of pixels, anonymity, and information on demand.

Update: Slightly off-topic but likely very important -> If you haven’t done so yet, I highly recommend you read John Mauldin’s latest letter on the evolving continuation of the subprime mortgage crisis.

Do you find yourself clicking on myth posts a lot?

Related posts:

1. Have You Lost Faith in the Market?
2. RRSP vs. TFSA: One Last Dip into the Debate
3. Opportunity Cost and Opportunity Lost

Let us rise up and be thankful, for if we didn’t learn a lot today, at least we learned a little, and if we didn’t learn a little, at least we didn’t get sick, and if we got sick, at least we didn’t die; so, let us all be thankful.

~Buddha

Today is Thanksgiving Day in Canada, so Happy Thanksgiving to all! Although we may not go as whole-hog on this holiday as our American friends, we do take the day off to contemplate our bounty. With the economic events of the past couple of years, some of us are probably feeling little less bountiful. My family’s financial position isn’t quite as secure as it was 3 years ago, but I don’t necessarily feel less thankful today as a result.

In the spirit of the holiday, I decided to challenge myself to think of 10 things that I’m most thankful for today. My list is published below, but I must confess that I might come up with one or two variations if you asked me the same question next week.

10 Things I’m Most Thankful For

1. My Family

I’m thankful that my husband finds my weird habits amusing. I’m thankful that my 3 sons are growing into fine, independent thinkers. I’m thankful for my parents, sisters, and extended family. But most of all, I treasure my weekend “dinners with the boys”.

2. Music

I love most types of music and I’m thankful that I can choose to listen to whatever strikes my fancy at the moment. I’m thankful that the musical talents of 2 of my sons have deepened my appreciation for this art form.

3. Clean Water, Good Food, and Red Wine

It’s easy to take life’s simple pleasures for granted. I’m taking this day to appreciate these 3 simple pleasures, and I’ll be very grateful if I can enjoy the latter two this weekend – in moderation.

4. Good Health

While we have a few health glitches here and there, none are very serious, and I’m so thankful for that.

5. Literature

I’m always thankful for a good read. I prefer to hold a book in my hands, but I’m also grateful for the variety that the internet allows. (See below.)

6. The Internet

While its advent has come with a few new problems, I’m thankful that the internet provides me with answers to my questions everyday. I’m also grateful that it allows me to write about topics that mean a great deal to me, and hopefully, answer the questions of my fellow readers as well.

7. Capitalism & Democracy

Most of you know that I think we’ve got a few cracks in both of these right now. But I still think these two systems beat any of the alternatives hands down.

8. Baseball

Fall is always bittersweet for me. I’m sorry that my Toronto Blue Jays didn’t make the playoffs, and I’m sad to see the baseball season end. But at least I get to watch a little more baseball as the trek to the World Series begins. Oh, and it looks like I’ll get to see Roy Halladay pitch again too, so I’m thankful for that – even if he is wearing a Phillies uniform.

9. Mean Reversion

I know. This one sounds silly. But I really am thankful for the amazing tendency of all things in nature, economics, and finance to return to a balanced state. It makes me feel better when I look at the current state of our financial system to know that “this too shall pass.”

10. Balance Junkie Readers & Fellow Bloggers

I’m so thankful for each and every person who receives my ramblings in an RSS reader or email each day. Thanks to every person who takes the time to contribute to our discussion by leaving a comment or sending me a question via email. I’m also thankful for the many bloggers out there who see fit to regularly mention, link to, Retweet, Stumble, Digg, or Tip my writing. I never take these things for granted and I’m surprised and grateful each time they occur. Thanks to all of you!

It’s Not about the Money

So there’s my list. Did you notice anything? None of these things have anything to do with money, except in a very tangential way. Maybe that’s why our slightly lower financial standing hasn’t really changed my level of happiness or my feeling of thanks on this day.

Even when things were looking a little less rosy, I always felt that, as long as my family was more or less OK, things couldn’t be all that bad. I love the opening quote that I used today. I’m going to try to remember it the next time I’m stressing out about something that’s really not all that important in the end.

Now it’s your turn. Will you take the Thanksgiving Challenge?

What are you thankful for?

Related posts:

1. Thanksgiving Thoughts for 2011
2. The 7 Link Challenge: Balance Junkie Edition
3. Our Money Story: Part I