Category Archives: retirement

Why Your Goals Don’t Work

Yesterday, I assigned my students a voluntary overnight project. We had discussed goal setting in class and I wanted to impress upon them the importance of writing down and prioritizing their goals. As I generally find in my classes, only a small number did the whole exercise.

I already know why many of my students failed to follow through on this well-established method for getting what we want out of life. It is the same reason many of us fail to follow through. We say we want to achieve great things, but in the end, we would really rather stay in our comfortable cocoon of low-level misery.

We know from well over a thousand studies that goals work–that is, they lead to high performance. If you want to lose weight, make more money, or achieve anything else quantifiable, goals are the way to do it. Yet we all know how easy it is to get distracted while working on a goal. Why is that?

In my view, there are two major reasons we find it difficult to achieve things. The first stems from what I call a “mind-split.” On the one hand we want to accomplish what we set out to do. On the other, we are afraid that we just might succeed. If we succeed, we show ourselves and the world that we really are capable. It renders null and void all the excuses we used before, and by implication, the excuses we may want to use in the future.

The second hindrance to goal achievement is having the wrong goals. High performance does not necessarily lead to happiness and personal fulfillment. I see this in “achievement junkies,” people who crave the next chunk of conspicuous wealth or yet another trophy in a sport they have grown to despise.

Learning the mechanics of goal setting takes twenty minutes. Learning to set the right goals may take twenty years. As you set out on the great journey that is entrepreneurship, remember that getting what you really want is scary and that getting what you think you want may make you miserable.

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Filed under economy, entrepreneurship, financial crisis, investing, jobs, money, retirement, wealth

Is This Socialism?

In order to understand the premises of socialism, we need to understand two words: “from” and “to.” Specifically, socialists believe that justice is served when societies observe the following rule: From each according to his abilities; to each according to his needs.

On the face of it, this sounds just. Who would quarrel with the idea that people should get what they need? It is the “from” part that get us into trouble. If life were a matter of us all standing around a pre-existing barrel of goods–food, clothing, shelter, and other necessities–and taking what we needed, one might justify this distribution rule.

Of course, we all know that is not how the things we human beings need come to exist. Except for air, basic necessities have to be created by someone. Socialism presumes it is right to take from the creators and give to others. Is that what our economic system has become?

You bet it has, but not in the way you may think.

The complexity of our economic system has allowed us to take from people who don’t exist yet. How can that be? It is called debt. Debt is en extremely useful tool. If someone lends you money to buy something you could not purchase with cash, say a house, many people benefit. You benefit because you are able to use something valuable before you pay for it completely. The seller benefits because he/she can sell to someone who otherwise could not purchase. The lender also makes money.

If we had no system for borrowing and lending money, it would be nearly impossible to own anything like a house or car. Here is the problem. Not only can regular people and private businesses borrow money, so can the government. The difference is that the government borrows from future generations.

One way the government does this is to borrow money literally. It essentially issues IOUs to its citizens. The government can also print money. In the first case, debt can build until the present generation cannot pay it all off. In the second, government spends money it has “printed” and hopes no one notices that the resulting inflation has robbed citizens of buying power.

Either way, the system makes chumps of us. If we live frugally, save our money, and teach our children to do the same, we wind up feeding the government’s insatiable appetite for spending at our own expense. At some point, the system has to break down. Either our children and grandchildren will have to pay absurd tax rates or the value of our currency will diminish to zero. Maybe both.

And this brings us back to socialism. If the government tried in the present to take the amount of money it needs to sustain its orgy of spending, citizens would revolt. If they hide their theft by passing it on to its future citizens, we who are right here right now may grumble, but we won’t revolt.

Is this how we want to live? If so, let’s be honest about it. Socialism advocates taking from the “able” and giving to the “needy.” If you believe that, are you willing to look future generations in the eye and tell them that we gave and gave and gave and that by the way, they owe the bill?

I didn’t think so.

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Filed under currency, economy, entrepreneurship, financial crisis, infllation, investing, money, retirement

Killing the Goose

We all remember the story of the Goose and the Golden Egg. Anxious to become wealthy without working for it, the farmer eventually kills the goose because one golden egg a day just isn’t enough.

California voters just sent a message to their politicians that they will not become the second goose to die at the hands of the shiftless and lazy. By an astonishing margin, the general populace told Sacramento that increased taxes and smoke-and-mirrors borrowing will not fly. Let us pause to celebrate a victory.

Most Americans still believe that we each own what we create. To politicians, this is a novel idea. They prefer instead to think of wealth creators as being at their disposal. Not content with only maintaining essential services like police protection, they find in taxpayers a never-ending source of wealth to confiscate and distribute according to their notions of “fairness.” Of course, “fairness” is usually linked to re-election.

Fellow citizens, we are the geese and the farmer is trying to kill us. Like California, let’s send the message loud and clear that enough is enough.

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Whose Money Is It Anyway?

Most of us work until sometime in May to pay our taxes. The rest of what we earn is ours. Hey, wait a minute. Isn’t that first five months ours too?

Not according to the government. In fact, they take it before we ever get our hands on it. Those of us with jobs have taxes withheld. Take a look at your next pay stub and remind yourself how much money you DON’T get each pay period.

Here’s the kicker. Far and away, it is the middle class that gets whacked for taxes. Why? Because it is easier to collect from us. The poor don’t have any money to confiscate; the rich have enough money to hire people who can protect what they earn.

Is that fair? I leave that to you. But, if you decide that paying less in taxes is a good thing, read on.

Owning a side business has numerous advantages. You control it, and if you manage it properly, you can build up a solid retirement to supplement or replace your “traditional” retirement. Better yet, you can protect more of your “regular” income from taxation.

Tax laws allow numerous deductions for business. Many expenses can be used to reduce your taxable income. So, in addition to having more income, you get to keep more of your money. Be sure to use a good tax advisor, because the laws must be followed closely.

The Boston Tea Party was prompted by a 3% tax. Many of us pay over ten times that amount now. I doubt that pouring tea into the harbor will do much good these days, so throw your own little tea party. Start a side business and keep more of what was yours to begin with.

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Truth or Consequences: Holding Big Business Accountable

When you or I start a business, we do not usually have the luxury of picking up the phone and calling our Congressman. Imagine actually getting through to your representative and having this conversation:

Noel: “Congressman Smith, this is Terry Noel.”
(Smith motions to his Executive Assistant, shrugs his shoulders, and writes a note asking who the hell this guy is.”)
Congressman: “Larry! Great to hear from you! You know, I am doing everything I can to stop global warming, guard against the swine flu, and get steroids out of baseball.”
Noel: “Well, Congressman, that’s not really why I called.”
(Smith motions again. Writes a note asking for the caller’s record of campaign contributions.)
Congressman: “Nothing?”
Noel: “Huh?”
Congressman: “What? I mean, nothing is more important than my constituents.”
Noel: “Well, you see, I have a big problem. My business is coming up short this quarter. To tell you the truth, I could use a bailout.”
Congressman: “I see…”
(Circles his finger at the side of his head in a cuckoo motion.)
Noel: “Not much. I mean nothing compared to the big banks.”
Congressman: “Well, Harry, it’s been nice talking to you and I appreciate your vote.”
Noel: “Wait! The bailout?”
Congressman: “Yes, I am making sure that all these companies are held accountable. I am glad you support me. American jobs for American workers. That’s what I say. We can’t let our businesses suffer because of low wages in Fiji. Call again. Anytime.”
Noel: “But…(click)…

When government injects itself into the economy, its actions are arbitrary, capricious, and usually based on campaign contributions. As long as politicians are given the power to reduce competition through regulation or provide subsidies outright to their contributors, businesses can grow. In fact, they can grow rapidly because they no longer have to work as hard to satisfy their customers. When things get rough, they ask their political friends to change the rules instead of competing fairly. Businesses don’t get winnowed out for failure to perform.

The winnowing process of a truly free market is supremely neutral. If you or I do not provide a better product or service than our competitors, we lose money. If we lose enough, we go out of business. The only way to stop the current insanity of propping up businesses that are “too big to fail” is to take away politicians’ power to interfere.

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Thanks, Mr. President

No doubt hearing the cries of Tea Party attendees last week, President Obama bravely slashed $100 million dollars from the budget. $100 million dollars is a lot of money. That is, unless you compare it to the rest of the budget. Let’s do some math. At least seven or eight trillion dollars has been created and injected into the economy. My calculator won’t go that high, so I got out a big piece of paper and starting dividing. It turns out that it is 1/70,000 or .00001.

My first reaction was laughter. I thought I had accidentally stumbled upon The Onion web site. Nope. Turns out it was legitimate news. I had to ask myself, “What kind of nation have we become that we allow our leaders to insult us so roundly?”

Of course, we know exactly why Obama is doing this. It is to take our minds off what he and the rest of the government (our government) are not telling us about the financial crisis. When the truth comes out, will we fall for yet another cynical ploy like this one?

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"I’m not dead yet." scene from Monty Python’s Holy Grail

“In the long run, we are all dead.” John Maynard Keynes

This ranks as one of the most irresponsible remarks in the history of humanity. Keynes may have filled his own prophecy. He is dead. We are not–at least not yet. But we are living in Keynes’ long run and we are about to find out how wrong he was.

Keynesian economics called into question the premises of the classical theory that preceded it. Keynes thought that laissez-faire capitalism, the freedom of individuals to trade with little or no interference from the government, would lead to sub-optimal outcomes for the economy as a whole. He advocated a more aggressive role for government to counterbalance business cycles and to promote economic well-being through “stimulus” spending.

Little wonder that politicians embrace his message. Keynes’ invitation to spend, spend, spend is like telling an alcoholic to drink, drink, drink. The only difference is that taxpayers get the hangover. A huge economy like ours is a hard thing to break. Because we have, at least up until now, retained enough economic freedom to entice bright people to create and sell things we all want and need, we have survived. Until last year, we even gave off the impression of having prospered. That is, until millions of retirees watched their portfolios implode. Welcome to the long run.

Many of us with limited-government sensibilities thought the last nail had been driven into Keynes’ coffin two decades ago. As it turns out, he may drive the last nail into ours. Obama and his Democratic allies in Congress have conjured up his spirit, invoking heroic images of FDR, the imagined savior of the Great Depression. And lest you think this is a Republican-friendly blog, they are no better. If anything, they are more devious, pretending to prefer less government while spending like inebriated seamen. In a way, Democrats are the streetwalkers of American life. They don’t pretend to be anything but what they are or they are too stupid to hide it. Republicans are call girls, cleverly pretending to be respectable, but eager to go spread-eagle for a slightly higher fee.

No amount of ranting about politicians, cathartic as it may be, will help any of us. The system has been rigged over a period of decades and is now beyond repair without radical changes. Don’t hold your breath waiting for politicians to learn anything. What will help us as individuals is a realistic preview of what is about to happen and how to protect ourselves. This time, folks, it is different. We are beyond arguments about what government should do. We are about to find out what they cannot do.

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Welcome to Empty Nest Egg

Welcome to the first in a series of posts on the topic of our current financial crisis. I teach entrepreneurship at the university level and have spent a large amount of time researching and thinking about how and why people start businesses. Some want to, perhaps because they do not like working for someone else or they hate working by the clock. Others are interested in achieving great wealth, something that is next to impossible with a job.

The events of 2008 have created another compelling reason to start a business. Many of us will simply have to. Though I am at my core an optimist, I believe that we have reached a tipping point. In the blink of an eye, we have seen the imminent collapse of our largest financial institutions, insurance companies, and automakers. Job layoffs are increasing rapidly, as are foreclosures. It is not pretty and it will get worse.

My purpose in writing this blog is twofold. First, I want to offer my interpretation of these disturbing events. The mainstream press has done an abysmal job of exposing the real culprits in our descent into economic madness. Second, I want to offer readers a way out. While the next few years are going to be a rough ride, those who are willing to learn some basic business skills and to question their previously held assumptions about the relationship between government and the economy have the opportunity not only to survive, but to prosper in the coming years.

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