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Four Minus One Equals Zero

by Alan Fox 0 Comments

Even if you don’t appreciate math you probably think there is something wrong with my arithmetic.  Four minus one is three, not zero.  Everyone knows that.  But give me two minutes and I will demonstrate I’m right.

Specifically, I will show you how your entire profit from four excellent financial investments can be wiped out by a single loss.

Suppose you have a one hundred dollar bill free and clear from the shackles of rent, food, transportation, or insurance (you do like fantasy, don’t you?).  You’ve thought long and hard and have decided it’s better to have your money work for you than for you to work for your money.  So you resolve to invest.

You want to invest carefully because you don’t want to lose your money, so you decide to convert your one hundred dollar bill into five twenty dollar bills (check out my math on this). Then you invest twenty dollars in five separate investments.

You can invest in whatever you like.  Your daughter or son’s lawn mowing business would be fine.  Your friend’s expedition to Las Vegas, maybe not so fine.  If you decide to invest in the stock market I suggest you check with me first because my timing there has been terrible for years.  (Hint:  I’m not invested in the stock market right now.)

What annual rate of return should you expect?  In general, I would say that ten percent is not unreasonable. That is two dollars profit every year on a twenty dollar investment,

But let’s assume you are an extraordinary investor, or just plain lucky, and on four of your twenty dollar investments you actually earn a fifteen percent return.  That’s twelve dollars in profit on eighty dollars invested.  Fifteen percent! Good for you!  You might be tempted to reinvest your twelve dollars, along with the original eighty, for even more profit next year, but the concept of compound interest is a topic for a future blog.

To summarize so far – you now have four profitable investments, and twelve dollars more than you started with.

But, alas, your judgment, or luck, or pizazz, ran out on your fifth investment and – handkerchief please – you lost twelve dollars. From the original twenty you only have eight dollars left.  That’s depressing.  And it happens all the time.  Even to me.  Even when I invest with a reputable money manager.  Stuff happens.

But when you subtract your twelve dollar loss from your twelve dollar profit, what are you left with?  Nothing.  That’s the zero.  So four (profits) minus one (loss) equals zero.

Do I suggest that instead of investing you spend your hundred dollars on wine, weekends, and whack-a-mole?  That’s entirely up to you.

But I do suggest that if you do invest you consider being careful, because one large loss can wipe out all, or more than all, of your profit.

The same idea applies equally to other areas of your life.  I have been known to occasionally drive a little faster than the speed limit.  My profit was the time I saved in transit.  But three time over the years my entire time-profit was erased when another driver unexpectedly turned left in front of me.  The time I spent in the emergency room and in arranging for body work for my car was much greater than the few minutes I saved on all of my other driving trips put together.

Four minus one equals zero.  So be careful with your investments and, especially, when you drive.

Alan

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Pleasing All of the People All of the Time

by Alan Fox 1 Comment

I ended last week’s blog “The Fear is Inside Me” with the following words:

Though I have overcome some of my fears, such as public speaking, there are others I can live with.  I don’t do roller coasters or zip lines.  I only do trams if there is enough social pressure.  I also have a fear of disappointing people.

After reading my blog, a business associate suggested that I elaborate on my fear of disappointing people.  This struck me as a good idea.

Disappointing people is a fear that many of us share, and it’s a tricky fear to navigate.  The idea that you can’t “…please all of the people all of the time” was written by poet John Lydgate, and amplified by Abraham Lincoln for good reason.

To overcome this fear, I suggest you start by defining what it’s really about.  I could write a short book on the subject, but here I’ll confine myself to no more than 600 words.

If you have no fear of disappointing anyone ever, then it would be a waste of your time to continue reading.  I’m sorry to disappoint you.  Well, not really

But if you share my fear of disappointing people then we have set ourselves a nearly impossible task.  Because as others have said before me – you can’t please all the people all the time. Also, others can use your fear of disappointing them to manipulate you. When that happens to me, I have found my best solution is to immediately and permanently cut those people out of my life.  Do you have a “friend” who never calls you unless they want something?  That is a clue that your relationship is give and take. You give, they take.

If you have a parent, or child, who “guilts” you into providing whatever they want, the above solution could seem drastic and might not appeal to you.  In that case I suggest that you write a list of what you are comfortable with, and share that list with them.  Then enforce the list without exception. Remember – they are better at manipulating you than you are at resisting them.  So stand your ground.  It will get easier over time.  The list may be as long or as short as you like. It could even be one word, such as:  “Money.”

In writing this blog I thought more deeply about what I was really afraid of, and I realize that it isn’t so much that I fear disappointing people.  I’m afraid of being rejected by the people who are important to me.

For example, each of my three People Tools books received at least one or two low ratings of “1” on Amazon.  Some readers don’t resonate with what I write.  No problem.  Reject away.  It comes with the territory and doesn’t bother me.

But being rejected by people who are important in my life is different. I have discovered that the best way to avoid rejection is to talk to them.  You might try your own variation of this statement. “I always want to please you, but I’m uncomfortable with what you’re asking for.  So how can we work out a compromise that satisfies each of us?”

If a real friend doesn’t bite at this offer, you might be in a relationship that will continue to bite you.

But also, when someone pleases you, let them know.  You wouldn’t want them to worry about real or imaginary rejection, as you do.

Alan

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The Fear Is Inside Me

by Alan Fox 1 Comment

We are all afraid of different things: falling, commitment, money, or getting hit by a car.  Some of our fears are realistic and useful – I’m afraid every time I cross the street or drive a car.  I think that is appropriate.

But some of our fears hold us back. My fear of heights keeps me from ever standing on the edge of the Grand Canyon and admiring the view. Although, I will enjoy the vista in someone else’s photos, or from an airplane – isn’t that the way the Grand Canyon is supposed to be seen?

I used to think that all of my fears were universal, until I saw a video of men in hard hats welding steel girders on a skyscraper under construction more than sixty floors in the air. These workers were actually walking on steel beams where a single slip would send them to certain death.  Ouch!

I wondered, “How can anyone work five or six hundred feet above the ground, and walk around without a net?”

Then it struck me – my fear of heights is inside me, but not inside them.  They’re not afraid of heights.  I am.

Any specific fear that you or I have is not universal. Our fears are completely personal, and spring from our own genetics and life experience.

My mother tended to overdo fear of death.  “If you eat food which tastes bad you will get food poisoning and die.  If you don’t wear your boots in the rain you will catch pneumonia and die.  If you don’t look both ways before crossing the street a car will hit you and you will die.”

Thanks, Mom.  To this day I’m suspicious of food (hint:  food can taste pretty darn good and still give you food poisoning), and I still look both ways whenever I cross a street, which seems reasonable.  But I’ve never been actively afraid of my own death. Maybe Mom did me a favor and desensitized me to the idea by overusing it as a boogeyman.

The good news is that if a fear is personal to you, then you can do something about it.  A few years ago I was riding a tram down from the top of a ski slope.  I intentionally stood at the front of the tram and stared directly down at the ground for the entire ride.  I actually enjoyed the ride.  But it didn’t stick.

After the tram I tried my newly discovered courage on a zip line in Costa Rica. I gamely hiked to the starting point and climbed up the tower.  The guide strapped me into a harness after everyone else in my family had already zipped away.  Then I looked down.

This was the first of eight separate zip lines.  Maybe that’s why they called it “Zip Line Heaven.”  You couldn’t just do the first one, you had to complete all eight. As I was about to step into the abyss I realized that I would have to repeat this incredible experience seven times.  No thanks.  I asked the leader to let me out of the harness, I climbed down to earth, and I walked back to the parking lot to wait for my fearless family.

I should mention that even though I have overcome some of my fears (such as public speaking) there are others I can live with.  I don’t do roller coasters or zip lines.  And I only do trams if there is enough social pressure. I also have a fear of disappointing people.

Alan

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