Some years back I was wanting to prepare seminar material before racing down country so I asked my secretary, who happens to be my wife, to fend off any requests for an appointment until my return the next week. But she relented and booked in an evening appointment. A 48 year-old man who had worked over 21 years as a qualified tradesman in the one workplace was summarily called in by management and offered three alternatives:
1. To leave and take redundancy money of just over $25,000.00.
2. To be retrained and eventually be assigned another task and be relocated in another area.
3. To take a lower paid job in the same place and receive a payment of around $5,000.00 as compensation.
Well, he and his wife came and we had a four-hour session. To solve his problem, and it really was a problem as he literally didn’t know which way to jump, I could have used a few of the decision processes that people use.
Firstly the Binary System. This is a computer term which uses the method of either on/off or yes/no. Yes, we will take redundancy; no we won’t take redundancy. Yes, we will retrain; no we won’t retrain. If this is a system you use, you will eventually make a bad decision.
The next is the Voting System. Ask as many people as you can what they think you should do then take a vote.
Or we could use the Intuitive System. “I just have a very strong feeling that I should take redundancy,” or, “I had a dream last night that I was sitting in a rocking chair enjoying the scenery. That must mean redundancy.”
Well I’m not enamoured with any of these puerile systems and prefer to do a feasibility study using the Pros and Cons method.
I quizzed them about retirement. Would they be content to stay in the same house and locality? Had he any skills that would enable him to turn a hobby into a small income? Did they have a mortgage free house? If not would they repay the mortgage if they took the redundancy money? Could they exist on the unemployment income without touching capital and many other questions. It was fascinating as we went through all the options how one started to strengthen with many pros while the others racked up more and more cons.
By the end of the evening he knew without a shadow of doubt what he was going to tell his boss the next day. Then we completed the financial plan (using the unemployment income) balancing with a reasonable surplus. It was rather nice to receive a telephone call of thanks the next day by someone who had considered all the options, weighed up all the consequences, and then made a firm decision.
By the way, I knew right at the start which option they should take and could easily have completed the interview in a quarter of the time. But then it would have been a decision made by external influence rather than considering every angle and together planning the future.
Can you guess which option they took?
Monday, September 15, 2008
Sunday, September 14, 2008
SLOWLY DOES IT:
Motivational books abound telling us how to be successful in life – the main emphasis being that success is equated with how much money we have accumulated. They may endeavour to disguise the base desire to be a millionaire but the suggestion that if we had a million or two all our troubles would be over appeals no end to avid readers. Castles in the air can produce an airy-fairy attitude of let’s get rich quick, hence the popularity of the TAB, lotto, football pools etc..
Money is really only good for what it can do. We need sufficient of it to run our household but it shouldn’t be a main goal just to accumulate riches. Misers are never happy and contented people and they won’t be remembered just for having a lot of money. When a multi--millionaire died someone asked, “How much did he leave?” The answer was, “Everything!” But the great philanthropists are remembered with gratitude for having given this world a legacy that endures. So, if you want to make your mark in this world, you need to learn how to work less and get more done. Most of us work harder than we have to in order to reap the benefits life has to offer. People can lock themselves into circumstances which make it imperative that both partners have to work too hard just to stay afloat.
Mastering our personal finances is the key to succeeding in this life. It’s all very well taking speculative risks but even a minor disaster can tip the scales and lock us into a debt situation. We are all apt to take risks now and then but some people don’t do their homework and try a feasibility study to see what the end result of their action will be. We all hear about and envy the entrepreneurs who take enormous risks, pull them off, and live in the lap of luxury. But seldom do we hear about those who fail and litter the bankruptcy courts.
My advice is to beware of the get-rich-quick syndrome and look for long-term stability that comes with adequate financial planning. To always have a sufficient percentage of unallocated income to cover any future contingencies and to gradually improve the financial position year by year is the best proposition. In this way while we won’t rise to any great financial heights we will not suffer the depression and despondency of those who have bitten off more than they can chew and failed financially.
Discouragement is the one commodity that we cannot afford to live with for any length of time.
Money is really only good for what it can do. We need sufficient of it to run our household but it shouldn’t be a main goal just to accumulate riches. Misers are never happy and contented people and they won’t be remembered just for having a lot of money. When a multi--millionaire died someone asked, “How much did he leave?” The answer was, “Everything!” But the great philanthropists are remembered with gratitude for having given this world a legacy that endures. So, if you want to make your mark in this world, you need to learn how to work less and get more done. Most of us work harder than we have to in order to reap the benefits life has to offer. People can lock themselves into circumstances which make it imperative that both partners have to work too hard just to stay afloat.
Mastering our personal finances is the key to succeeding in this life. It’s all very well taking speculative risks but even a minor disaster can tip the scales and lock us into a debt situation. We are all apt to take risks now and then but some people don’t do their homework and try a feasibility study to see what the end result of their action will be. We all hear about and envy the entrepreneurs who take enormous risks, pull them off, and live in the lap of luxury. But seldom do we hear about those who fail and litter the bankruptcy courts.
My advice is to beware of the get-rich-quick syndrome and look for long-term stability that comes with adequate financial planning. To always have a sufficient percentage of unallocated income to cover any future contingencies and to gradually improve the financial position year by year is the best proposition. In this way while we won’t rise to any great financial heights we will not suffer the depression and despondency of those who have bitten off more than they can chew and failed financially.
Discouragement is the one commodity that we cannot afford to live with for any length of time.
Friday, September 12, 2008
HOW TO EVALUATE A GOOD BUY
Let me share with you a few rules that have saved us a mint of money over the years. Firstly I must confess to being a bit of a spendthrift. It’s quite disastrous for me to enter a hardware shop. I can see so many good reasons to buy a power tool. I will be able to make endless works of art for the house and save vast amounts of money by not having to call in a technician.
Years ago my wife suggested that we check with each other before buying any item of a capital nature above $20.00. I realized that this would have an inhibiting factor on my buying escapades but nobly assented to the proposition. It has been one of the best rules governing my spending and has enabled us to save for the larger goals instead of frittering our money away on the odds and ends.
The second rule is that we took it in turns to decide what to buy with our special savings money as it builds up. Again my wife suggested a limit of $2,000.00 just in case I had big ideas to save up for a BMW. Over the years it has been real fun to work out what month each partner would be able to achieve his or her goal. We would invariably have a little celebration of some kind to mark the achievement so both of us could enjoy the purchase. Now that our income has shrunk we have graduated to writing out our individual financial goals separately, then coming together to merge them, and finally putting them into order of priority. Then we save up to achieve these one by one not forgetting the treat which marks the occasion.
The third rule has saved a mint of money. We call it the “delayed action” rule. When the shop assistant has made his pitch we say, thanks very much, we’ll be back with within an hour after we have discussed the pros and cons. Time and time again the decision is not to buy. The reason for the delayed action is to give us opportunity to coolly evaluate the purchase without the pressure of the salesman and also to look around for another make which may be a better bargain.
Here are a few questions to ask yourself when considering a purchase.
Do I really need it? Just because it has a bargain price tag doesn’t mean you need it.
Is the price reasonable? Don’t be afraid to check around.
Is this the best time of the year to buy? Prices get inflated around Christmas time.
Can the appliance be serviced? It may be a throwaway appliance that would be a bad buy.
Compulsive or impulsive buying doesn’t reap happiness in the long run.
Years ago my wife suggested that we check with each other before buying any item of a capital nature above $20.00. I realized that this would have an inhibiting factor on my buying escapades but nobly assented to the proposition. It has been one of the best rules governing my spending and has enabled us to save for the larger goals instead of frittering our money away on the odds and ends.
The second rule is that we took it in turns to decide what to buy with our special savings money as it builds up. Again my wife suggested a limit of $2,000.00 just in case I had big ideas to save up for a BMW. Over the years it has been real fun to work out what month each partner would be able to achieve his or her goal. We would invariably have a little celebration of some kind to mark the achievement so both of us could enjoy the purchase. Now that our income has shrunk we have graduated to writing out our individual financial goals separately, then coming together to merge them, and finally putting them into order of priority. Then we save up to achieve these one by one not forgetting the treat which marks the occasion.
The third rule has saved a mint of money. We call it the “delayed action” rule. When the shop assistant has made his pitch we say, thanks very much, we’ll be back with within an hour after we have discussed the pros and cons. Time and time again the decision is not to buy. The reason for the delayed action is to give us opportunity to coolly evaluate the purchase without the pressure of the salesman and also to look around for another make which may be a better bargain.
Here are a few questions to ask yourself when considering a purchase.
Do I really need it? Just because it has a bargain price tag doesn’t mean you need it.
Is the price reasonable? Don’t be afraid to check around.
Is this the best time of the year to buy? Prices get inflated around Christmas time.
Can the appliance be serviced? It may be a throwaway appliance that would be a bad buy.
Compulsive or impulsive buying doesn’t reap happiness in the long run.
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