Friday, April 30, 2010

How to save money - part 2

The best way to save

In the last post, I talked about personal finances and how to keep track of them. Now it's time to talk about ways to save money. As a bonus, I'll give some information about what you could do, when you're in debt and want to get out of it as soon as possible.

Saving Method 1: The Piggy Banks

There are many ways you can save money. I will start with the most obvious one: putting coins in a piggy bank. I used to do this when I was little. It's a good way for children to learn how to save money. But there is a problem with this approach: the money in the piggy bank, is not doing anything. It sits there, waiting to be spend. And if you don't spend it, nothing else will happen.
Actually, this is not true. Money devaluates. The money you have now, isn't worth as much within several years. The reason for this is inflation. Everything gets more expensive. That's why they give you index adjustments in your salary. To cope with inflation. I don't quite understand the reasoning behind all of that, that's beside the scope of this article.

But what you should remember is this: the money you have now, will not be worth as much within several years. Money devaluates.
So we need a way to keep our money up to date with inflation. Or better yet, we need to overcome the inflation rate.

We can solve this in 2 ways:
  • Make sure we have enough money, so when inflation eats part of our money, the amount that's left is still enough.
  • Make sure the money we aren't using is still growing, by gaining interest.
For the piggy bank, the only thing we can do, is to add to the pile. This means that if you want to have more money and/or save more money, you need to put more of the money you get from working into the piggy bank. Your salary is automatically adjusted to inflation, so in this case inflation is not a problem. As long as you keep working.

If you want to save more, you need to be resourceful. Look at your financial data, look at the categories you made in the last post and see where you can cut back on your expenses. It'll fill your piggy bank faster.

Saving Method 2: the bank

When you put your money in the bank, you get some interest. But you also have to pay for basic services and inflation takes part of the money. So in the end, keeping your money in the bank levels out and thus it becomes comparable to the piggy bank method.

There is an added difficulty, however: extra services. You can get extra services, like credit cards, phone banking, etc. It's important to take only the basic package. Every extra service you take, will cause the bank method to cost you money. If you don't need e.g. a visa card, don't get it. It'll cost you a yearly fee. No matter how small those fees may be, with the basic package you almost level out. This means that the bank method does not really cost you money, but you don't gain extra money either. Expenses compensate for the low interest rates.
If you take the basic package, all you need to do to save money is work and add to the pile, just like with the piggy bank method.

Note: A savings account, gives a bit more interest. So when using this method, it's a good idea
to put the money you don't need to pay the bills, into the savings account. It might give you a small advantage.

Saving Method 3: funds

The stock market is a dangerous and scary place to put your money, if you know nothing about it. You can also put the money you don't use, in funds. Funds are basically a collection of stocks, managed by an employee at the bank. They guarantee you an approximate value in interest and your money back, if you keep the money in the fund for a predefined period.
This is interesting, because the interest rates are higher than those of the savings account. So you'll be saving even more money if you put your money in there. So what's the catch? It's simple: they promise you e.g. approximately 10% on your investment, while in reality, they try to make 20%. The remaining 10% goes directly into their pocket.
To get that remaining 10%, you'd have to look at method 4.

Saving Method 4: the stock market

There's a lot to say about this, but I'm gonna keep this simple. If you buy and sell stocks, you can earn money. You can also loose money. If you study enough and know what you are doing, you can earn money money than you loose. This method can give you the highest possible interest rates, but that is entirely dependent on your actions, your knowledge and your mentality.
The stock market is not for everybody, especially not those that let their emotions interfere with their money making. But it's a good way to make a lot of money.

Other saving methods

There are more ways to save money. I don't even know them all. But it all comes down to the same basic principle: spend less than you earn. The last methods above, are for maximizing your interest. But this is just the icing on the cake. It's not a necessity for saving money.
Look at your budget, try to follow it. Adjust it when needed and finally: spend less than your budget says. The less you spent, the more you are saving.
Keep it simple. If it's too difficult, it can get out of control. If it's simple, you know exactly what's going on and then you know where you are going.

Bonus: How to get out of debt

I said a lot about saving and I kept it simple. But some people may think that it's not simple at all. Those people might have debts. Sometimes, those debts will get out of control.
The same basic principles still apply, you just have to look at it differently. The less you spend, the quicker you'll be out of debt.
There are two methods of getting out of debt, that I recommend:
debt snowball and debt avalanche.

Debt snowball

This is a method for paying off your debt, where you take the smallest loan first, pay that off and work your way up.
Steps:
  • make a detailed list for all the debts you have
  • add the amount of interest you have to pay for each debt
  • put the list in ascending order
  • pay the biggest amount possible (according to your budget) for the debt with the lowest interest, pay the minimum for all others!
  • when the smallest debt is paid off: repeat
Pros:
  • it's the fastest method for paying off debts
  • it goes faster in the beginning, so the impatient are less discouraged, because they see the changes quicker
Cons:
  • it's not the cheapest way to pay off debt

Debt avalanche

Even though I have no debts to pay off, this is my favourite method. It's almost identical to the previous one.
Steps:
  • make a detailed list for all the debts you have
  • add the amount of interest you have to pay for each debt
  • put the list in descending order
  • pay the biggest amount possible (according to your budget) for the debt with the biggest interest, pay the minimum for all others!
  • when the biggest interest debt is paid off, go on to the next one and repeat
Pros:
  • the longer you are paying off debts, the faster the debts will dissappear
  • it's the cheapest method for paying of your debt
Cons:
  • it takes longer for debts to dissappear in the beginning, which may be discouraging for the impatient
  • it takes longer in total, to get rid of all debt
To me, cheapest > fastest, that's why I prefer this method.

Conclusion

You can now manage your personal finances, you know several ways to save money and you know how to pay of our debt. You also know the basic principle that always helps to save money: spend less than you earn.
Remember to keep it simple and save well... good luck.

Thursday, April 29, 2010

How to save money - part 1

Saving money

In the previous post, we talked about saving money and it's importance in creating wealth. I would like to talk some more about it and explain how I save money.

Where do you start?


For people who are just to spend a lot of money, it might be difficult to figure out how to start saving. People who are in debt, will probably have trouble changing the habits that got them into debt in the first place.

I'm here to tell you that you can not change your behaviour overnight. It will cause you to rebound faster than a bouncingball bounces back, when thrown with force to the ground. It's comparable to loosing weight. You need to slowly change your habits, so you feel a gradual improvement. And the first thing you need to do, is answer the following question:
'Where do I stand?'

Where do you stand?


An easy answer would be: "I'm in debt" or "I'm doing fine". Those answers may be true, but they are not detailed enough to help fix or improve your current situation. You need to find out exactly how much money your spending and how much money is coming in. If you're in debt, there will be more money going out, so we need to find out where that money is going to.

Consider your money as a barrel. All debt is like a hole in the barrel, causing the water to flow out. You need to find the holes, so you can close them up.

Personal Finance Method 1: The Piggy Banks

If you have no knowlegde of computers and personal finance applications, a good way to determine your current budget, is to categorize everything and make a jar or a piggy bank for each category. For EVERYTHING you spend, you need to put the amount on a piece of paper and deposit it in the correct jar.

You have to start doing this from the first of the month and stop at the end of the month. Try to take a month without too much special occasions going on, an avarage month. If you have a month with a lot of birthdays, for example, you'll spend a bit more. This does not count right now. Try picking an avarage month.

At the beginning of the new month, you can then revise every category (jar) and count all the numbers of everything you spent to that particular category. Write it all down on a sheet of paper.

Make sure you have 3 columns: old expenses, goal and new expenses.
The numbers in the jars, go in the old expenses column. In the goal column, we will put a realistic budget, that will allow us to save money. In the 3rd column, we will be able to see if we can do it.

After we set a budget and put it in the 2nd column, it's time to try to live by that budget. You have to check whether you're doing this, in the same way as you determined the old budget. Empty the jars at the beginning of the new month and again, you write down everything you spent for each category. At the end of the new month, you count all the numbers in each category again. These values go on your sheet of paper in the 3rd column.

Now you can compare the 3rd and the 2nd column and see how well you did. If you count the totals of those columns, you have another interesting number to compare. This will tell you, whether you live within your budget. If total new expenses < size="4">Personal Finance Method 2: Personal Finance Applications

These days, computers can be used for anything. Managing your budget and keeping an eye on your personal finances, is no exception. It works in the same way as method 1, but you don't use jars and paper. Everything can be entered in the application, both the categories and the numbers.

This has an added benefit: most personal finance applications can generate small reports, so you can see in graphs how well you are doing. This can make your situation more clear.

If your somewhat of a computer geek or you like a simple and solid application, I recommend the clipf application. It's a free, open source python application that allows you to do everything you need to manage your personal finances and it's even capable of doing some basic reporting. Your data will be stored in a text-file. It works on the command line though, so this might not be the right application for everyone.

If you don't really know a lot about computers, you can always use a spreadsheet to keep a record of your spending. I would recommend openoffice for this, because it works well and it's free. There's a lot of information to be found on the internet, about openoffice and how to use it.
There are even templates you can use, so most of the work is already done for you.

What categories do I need to use?

This depends from person to person, from family to individual, etc. But there are a few categories that can and must be used by everyone. These include: house (rent/mortgage), house (repairs), clothes, food, hobbies, car/transportation, vacation.

You count the amount of money you pay for everything, on a monthly basis, and compare this to your monthly income. If you have one time costs, for example in the vacation category, you should take the yearly cost and divide it by 12.

This way, you can see all your expenses per month and you can compare it to your monthly income. The more categories you make like this, the more detailed you can start saving. The goal is to get each categories expense, as low as possible.

To save, you need to adhere to this formula:
(Total income per month - Total costs per month) > 0

The categories give you ideas as to where you spend too much money. Those are the places you can save, in order to meet the requirements of the formula.

But too many categories, means that you'll have too much work to do, to keep track of your finances. This will discourage you to continue keeping track of your money. So it's best to find the right amount of categories, so there's a good trade-off between entering enough data and having to put too much effort in entering financial data.

If you're unsure, just use the basic categories I mentioned above. Also note that smokers, should enter smoking as a seperate categorie. Just because it costs so much. And who knows, it might even persuade you to quit smoking, if you see how much money is lost to it?


Conclusion

You know some ways to keep track of your spending, you know how to compare the data, but what about actually saving the money? How can we go from being in debt each month, to putting money aside each month? I'll explain this in detail in the next post.

Friday, April 23, 2010

Early retirement - part 2

Retiring early

As I explained in the previous post, retiring early is something that got my attention. The most obvious way to accomplish this, would be to gather a lot of money. If you have enough money, you could live of that pile, for the rest of your life.
I explained a lot of options already, on how to get a lot of money. There is another way I would like to talk about: saving.

Saving money

In stead of trying to get more money, you could also go the opposite way. Keep the income you have now, but try to make sure there's as little money going to payments as possible. Cutting expenses is the best way I know, to save money. The less you spend, the more money will be available to put in investments. Combine this, with the magic of compound interest and your money will grow steadily over time.

This means that for every amount of money you save, you gain interest. That interest will have to be reinvested too. This causes you to gain even more interest. This will have to be reinvested too. This causes you to gain even more interest, etc. It's like an avalanche effect. Or like a snowball you roll down the mountain. The longer you roll the ball, the bigger it's going to get. And in the beginning, the new snow does not have a lot of place to stick to, but the bigger the snowball gets, the easier it will be for snow to find a new place to stick too. So the longer you roll the ball, the easier it will become to make it bigger.

The same thing is true for money. That's why they say that the rich keep getting richer and the poor don't. So the more you save, the more you can make your nest egg grow. It's very difficult to gain interest at first, that's why many people give up on this method, even though it's easy to do. But patience, will be rewarded.

Creating wealth

Saving money, is withouth a doubt the most important aspect of creating wealth. The more you're a cheapskate, the more money you will attract. But wealth without friends and family, is not a good thing... you need to find the point to which you can go, in order to save as much as possible, without jeopardizing your social life.

It's an exciting occupation, that could turn into an hobby. You save a bit here and there, at first, but after a while, you're finding new and ingenious ways to save money. And the more you save, the better you'll feel. This goes together with trying to live a modest lifestyle. Why want more, when you can settle for less and be just as happy?

It's also basic logic: you can only save money, if you gain more money than you spend.

dollar-in > dollar-out
or
euro-in > euro-out

So if you try to apply and optimise this formula, you will be creating wealth.

Conclusion

There's a lot to say about saving money, I'll dedicate an extra post about how to do it, later. But the important thing we need to remember is this: the best way to create wealth, is by not spending money. If we combine this with investing the money we save, we put ourselves in a situation, where 'becoming rich overnight' is possible. And because we change our lifestyle, so we can optimize our savings, we also put ourselves in a situation, where we will become wealthy, no matter what... even if it doesn't happen overnight.
So if you want to retire early, save that money! Change your lifestyle! You will get there!

Wednesday, April 21, 2010

Early retirement - part 1

The thought of early retirement

As I explained in the very first post, the reality of life and work in particular, made me find a way to escape this 'rat race', as it is called. I don't want to keep working for someone else, making their dreams come true. I want all my efforts to benefit my own life, in stead. I want to spend my days doing something I love to do.

You could take a different approach and accept the fact that it's just this job you don't like. In that case, finding other and more meaningful work, would be beneficial. But finding work you love is difficult and sometimes even impossible, depending on what you like to do in your free time. Not all hobbies can be turned into jobs.
One of my hobbies, for example, is martial arts. The only way, that I know, that allows you to earn money with martial arts, is by opening a dojo and instructing martial arts. I don't want to teach it, I want to keep learning.

Anyway, to get back to the point: I want to be free to do whatever I want. Another thing I always liked doing, was saving money. I never spent much money, so all the excess money went into 'piggy banks'. I had a lot of them, when I was a kid. So when I thought about those piggy banks, I made me think about money. I wouldn't have to work for someone else, if I had enough money.

So how do I get a lot of money?

I could marry a rich woman and throw her of a cliff at one of our trips to the sea-side. There are 2 problems with this idea: first, the Belgian coast doesn't really have cliffs that are high enough to make sure she's dead and second, it's not exactly legal. Such activities usually come back to bite you in the butt. On to the next idea...

I could marry a rich woman and keep her. But marrying for money? Nah, that's a relation that's doomed to fail. No rich woman for me.

I could win big with the lottery. But I don't play the lottery. Why not? I learnt statistics in school, which made me find out that you only have 0.00002 % to win the jackpot.
To clarify this: it's a form you fill in, where you can pick 6 numbers, going from 1 to 42. To win the jackpot, you need all 6 of them to be correct. This gives you (42 x 41 x 40 x 39 x 38 x 37 ) / ( 6 x 5 x 4 x 3 x 2 x 1) = 5245786 possibilities. That makes our chance (1/5245786)*100 = 0.00002 %. Or rounded that gives: 0%. The lottery? No thanks.

Robbing a bank, another great option. I once made actual plans to rob a bank, so I have really considered this option. I was only 14 at that time, so the plans weren't really that good, but I was playing with the idea. The problem with this, is that bank security has gone way up since then. It becomes more difficult to rob a bank and you would need special material. That material can cost a lot of money. It would also be illegal and like I said before, those activities usually come back to bite you in the butt. And even if you succeed, you could not live in the same country where you robbed the bank. Wait a minute... I could rob a bank in a country where the bank security is still somewhat low? No, it's still not a good idea. With international cooperation, it would not take long before they found you. You'd have to live in fear (of being caught) all the time. No thanks.

Gambling is another option. If you use the proper techniques, like flatbetting for example, you can steadily gain some money. It's all about money management. Spent little amounts, so you can loose a lot on the short term and still be a winner in the long run. That's how poker players can make a living playing poker. But I'm currently trying this with sports betting and I haven't had much success yet. I'm gonna keep trying this every NHL ice hockey season, but more as a hobby on a small scale. It's nothing that will make me enough money to become financially independent.

One of the best ideas to become rich, is by starting your own business. You'd have to work hard, but all the work you put into it, makes you money... makes YOU money. It's an option that I'm still considering, but I wouldn't have a clue as to what I would do for a living. I'm very bad at selling things. At the moment, I'm trying to get rid of clutter, by letting my brother sell it. He gets 50% of all things that get sold. I don't even like selling things. And another problem you get with starting your own business, is the social security you have to pay. It's at least 600 euro every quarter. That would be at least 2400 euro each year. You'd have to be able to make a decent living in order to pay for that and be able to pay the bills.
But it's not impossible, in fact, many people tried and many even succeeded. It's an option I'm leaving open for now.

The stock market provides opportunities to earn money too. I have some long term funds going, because I had money on my bank account that wasn't doing anything. I always wanted to buy real stocks myself, but I was a little affraid to do so. Many people lost money on the stock market and I didn't understand completely how it worked. But then this awesome thing happened: the economic crisis. It's not so awesome that many people lost their jobs because of it, but on the stock market, it means that most stocks go down in value. Waaaay down.

So when everybody started freaking out, I started gathering some information about stocks and the stock market. I sold one of my funds to free money for buying stocks and I bought my first stocks. You can make simulations, trying it out before actually doing it. But it's not the same, different emotions are involved. So I jumped right in and now I'm still doing it. It made me some money and I lost some money, but the most important thing is that I learnt a lot about it. I'm still learning, but this is a good way to make money and I'm going to utilize it to it's fullest potential. I actually love trading stocks. It excites me. So maybe I found something here... a hobby that could turn into a job perhaps?

There's still one more way to make money, that I have not mentioned. But I have a lot to say about it, so I'll leave that for the next post.

Secure your life

A safety margin

I talked about getting fired in the previous post, and how you should react if such an event occurs. One thing I mentioned, is important for what I'm about to explain: the difference between workers and 9-5'ers. In Belgium, when 9-5'ers get fired, they get 3 months to look for another job. This is only true, in case the company has no actual valid reason to fire someone other than 'cutting expenses' (restructuring). During those 3 months, you are allowed to take 1 day off each weak (in 2 half days), so you can look for another job during that day off or update your resume, go to job interviews, etc.
But what about workers? They only get 7 days? Is that fair? Does it matter?
I'm here to tell you that those free days are extra's, and whether you get them or not, you should always be prepared for when you don't have them. How? By building a safety margin in your bank account.

The importance of a safety margin

If you only have 7 days to look for another job or if you are fired on the spot, you can get unemployment. But it takes a while to get the paperwork in order (remember I talked about paperwork in the previous post about getting fired?). During that time, you have no income!
And for people who don't earn a lot of money or have almost empty bank account (those who live paycheck to paycheck), this can be a serious problem.
I wouldn't advise living paycheck to paycheck anyway, but that's beyond the scope of this post.
You could be in that situation at any time, so why not be prepared for it?
Build a safety margin that covers 6 months of living expenses. Why 6 months? Because you should be able to find a new job within 6 months. If you try and you want to, 6 months should be sufficient. If you disagree, change this number to whatever you think is appropriate. Every situation is different, but in general, 6 months should be sufficient.

How to save the money

You can do that by saving as much money as possible, until you reach the specific amount. Cut back on everything you don't really need and save to get that money first.
It's very important to have such a safety margin for several reasons:
  1. You can get fired for a lot of reasons these days.
  2. It might be difficult to find a new job right away, so you need a way to keep paying the bills.
  3. There might be problems with the paperwork, so it might take a while to get unemployment compensation.
  4. Other unexpected expenses may occur.
  5. Having such a safetymargin, makes you feel less affraid of getting fired.
Number 1 is obvious. Especially with the economic crisis that has been happening. The crisis is over now, but many companies still use it as an excuse to fire employees. It's business, nothing more. If they fire people, the share holders know that they save money, it might bring their dividend up, which will make them happy.
Number 2 is also obvious. Especially when a lot of people get fired. They all look for a new job, so the competition for jobhunters can be big. That's why many people couldn't find a job right away in the economic crisis. Also know that it's a good idea to take some time to find a job that suits you. If you take the first job you can get, you might end up in the wrong environment and get fired again. A safety margin gives you the time to be picky.
Number 3 happens to a lot of people. I once had to get unemployment too. The woman I had to talk to, could barely understand Flemish (Dutch) and she misunderstood everything I said. It's also important to stay calm when that happens. Even if they don't know what they're doing, you getting mad at them will only make things worse. Eventually I got the money though.
Number 4 requires some extra explanation. When you have a car and you use it to drive to work, it's a vital investment for your 'income through labour'. If it brakes down, you need to be able to fix it or replace it as soon as possible. This requires a safety margin too.
I do not advocate using a seperate safety margin for this though. Chances of you getting fired and breaking down your car, are small. And if you make sure that the total cost of your car is smaller than your safety margin, you should be alright. The most important thing you need to do is to make sure the safety margin is maxed all the time. If you use some of it during unemployment (to pay the bills and survive, nothing else), you need to save money again as soon as you find a job. If you break your car and need to buy a new one, no problem. But refill that safety margin right after the purchase! Stay safe. Safety is good. Safety makes you feel... safe.
Number 5 is also a good one. If you need to pay the bills, live paycheck to paycheck and can't afford to get fired, you're gonna jump for your boss to satisfy him. Because you can't be fired right now or you wouldn't know what to do. The problem with this mentality is, that you don't stand out anymore. You are not innovative, you don't 'dare'. And that is precisely what's good for your career or for keeping your job. If you are predictable, you are boring. If you are boring, your boss might not see anything in you. He can not expect something radical and improving from you. He can not expect brilliant ideas from you, that will make him rich(er). Be unpredictable, dare to do, dare to stand up to your bosses decisions. How? By not caring whether you get fired!
How? By trusting in your safety margin and your ability to find a new job anyway.

Conclusion

A safety margin is important. If you don't have one right now, make sure you do. Save that money. Build that safety margin and cover those 6 months of living expenses! It will make you feel safe and it might be good for your career.

Monday, April 19, 2010

Getting fired - part 4

Actually getting fired

You have done all you can, maybe you're too blame and maybe you're not. Maybe no one is to be blamed. But the time has finally arrived. The manager wants you to come to his desk, he may or may not be accompanied by a project leader or not... you already know what's coming, before you enter his desk.

There may be a lot of emotions going through your mind, but I'm here to tell you how you should react.

They will ask you to sit down and they will tell you they have to 'let you go' (they can not say something like "Welcome to dumpsville, population: You!", can they?).
It will come as a shock. Especially for people who didn't expect it, but even if you did sense something, there will still be a bit of a shock.

Whatever is going through your mind: Stay calm!
It's best to let it sink in for a minute or so, before saying anything.
Perhaps you're sad or angry and that's normal, but keep that to yourself. It doesn't matter if you get angry anyway, it will only make things worse. You have to realize that, once the verdict has been said, you are out. There's nothing that can be done about it anymore.
Let your emotions out in your free time, but this is not the right time! Suck it up, try to be as calm as possible and once it sunk in, it's time to find out the reason why they fire you.
The world does not end when you are fired, it's just your contract with this one company. There are a lot of companies in the world, in your region even... you can make a pick later and join another company. It seems harsh to immediately start thinking about your next job, but you'll have to do it. It's time to get answers.

Gathering information


It's time to find out why they fire you. Remember that companies are out to make money. In many cases, getting fired, does not mean you are a bad employer. And even if they think you are, they might still be wrong. But to them, it's all about making money. It's all business.

So why shouldn't you, being an employee, be considered as a business? They sell products or services and make a lot of money in the process. You sell your time (the time you work for the company) in order to get a paycheck. It's all business, the only difference is that they make tons of money and you get a miserable paycheck. But you being an employee is still a business!

Once you realize that, you are actually seeing that your business is taking a downturn. It happens to all businesses. Time to study, do some research and reinvest, to improve your business. Let me translate: time to find out why they fire you, so you can work on that at your next job.

This is the time to ask why they fire you, if they didn't mention it already. It's important to be understanding, calm (I keep repeating this, because it might be a problem for many people) and ask your questions in a calm and respectful manner. Even if they disrespect(ed) you (before), stay calm and supress your emotions. Remember, you are gathering information to be secure your next job.

If anything remains unclear, ask questions. But be short and to the point. Don't ask obvious questions. Actually, here's a list of questions you can ask:
  • 'And what would be the reason that you fire me?' (after they give a reason, say 'ok' or 'I understand')
  • 'And what happens now? Do I have to leave immediately or...?'
  • 'Do you have any remarks or tips that could help me with my next job?'
  • 'Is their any paperwork I need to fill in?'
I don't think there's anything more you could ask. For the paperwork, they'll probably redirect you to the HR department or payroll dept. or whatever it's called in your company. Once you are there, you can ask more questions about the paperwork.

In Belgium, you get a C4. You need that to be able to get money during unemployment. But your only unemployed after a safety period. For workers that would be 7 days, for people with a 9-5 job it's usually 3 months. (I know, that difference is not fair...)
You also get 2 half days/week holiday, which you can use to update your resume and for job interviews. They are called Sollicitation Holidays in Belgium. Use them.

It's also important to note, that they still have a lot of paperwork to arrange. If they see you take it well and respect their decision, they will respect you back and try to take care of that paperwork as soon as possible. This depends on the company off course, but you only know this when it's too late, so you better don't take any chances.
The good thing about 'getting fired' is, that you get an extra salary bonus and the holidays you have left, you can take with you. So at your next job, during the first year, you'll have extra holidays.

Conlusion

You got fired. Time to think about what to do next. Take the time to think about what to do next. Don't try to pick the same job if you didn't like it. A different experience or career will be good for you.
And remember: working is business too! A new job, means new experiences that could help you, either in your search for the ultimate job or in enrichening yourself personally.
Take a chance, don't be affraid to dare... your contract has been terminated, but you gained experience and it made you grow. Time to let another employer know this, so he can give you new experience.
Good luck finding a new job, if you're looking for one!

Getting fired - part 3

How to fix the problem: another job?

In the previous part, we discussed that working just hard enough, accompanied with looking like you are working hard, can prevent you from getting fired as long as the reason for being fired is specifically addressed to your achievements. But what if that reason is something else?

Companies can fire you for whatever reason they want, I'm not talking about that right now. I want to go into detail about those cases where you're stuck in a job that's slowly pulling you down. Those cases where you made a wrong career choice, that has a negative effect on your life.

It can happen to all of us. The job market is saturated with fancy job descriptions and most people don't understand what they mean anymore. I think they do this deliberately, to hide the fact that the jobs they offer might not be so interesting. As long as it sounds awesome or as long as it has a good title associated with it, people will respond to the job-opening.

I'm here to tell you, that you might have taken one of those jobs and you might have been wrong. Yes, we are still human beings and we can make mistakes. It's not very difficult to admit a mistake like that, the problem lies in understanding and seeing that you made a mistake. After all, they didn't fire you yet, so you must be doing something right.
Other excuses that cloud your judgement, might be:
  1. As long as I have work, I don't have to worry...
  2. I'll get to like this job, once I get better at it...
  3. As long as I get paid, I'll do anything...
  4. I need to support my family, I can't afford to be unemployed right now. I better work harder to keep my job, whether I like it or not.
  5. <Insert anything here>, whether I like it or not.
  6. There are no jobs available like this right now... I better wait.
  7. It'll be better once I get that promotion.
  8. I studied <X>, so I can't do <Y> as a job...
  9. ... (I bet you can think of more valid excuses, maybe you use a good one yourself?)

Are you in the wrong career?

If some of the excuses in the previous paragraph sound familiar or if you use another one yourself, than that's a good indication for knowing you're in the wrong career or job.

Another indication is how you go to work every morning. If you have to drag yourself out of bed every day, to get ready for work... that's another clear indication that you're in the wrong job. If you keep doing something you don't like or something you're not good at and can't or don't want to become good at, then you'll be tired every day. You'll know what crappy project awaits at work, so it takes a lot of effort to get out of bed in the morning. You worked hard trying to understand a difficult assignment, only to be progressing at a slow pace. That will in turn make you very tired in the evening.


Another way of looking at jobs

This brings me to the following: 'Don't get good at something you don't want to do'.

Remember that, it's important.
If you keep with your job, even if you don't like it, you might become good at it. This is a bad thing, because then you'll always have to do a job like that. Even if you get good at it, it will keep making you tired. You'll still feel like you are not where you're supposed to be and it will still bother you.
The way I see it, you have 2 options:
  1. Find a job you actually love or at least like, so it's negative impact on your life is as minimal as possible or find a job that gives you benefits that cancel out the bad things associated with a job.
  2. Find a job where you can learn stuff you could use if you ever wanted to start your own bussiness or where you can learn stuff that enriches you or gives you knowledge you can use in other aspects of your life.
Why should we look at jobs like working for someone else? Why not change our view and look at jobs like they are tools that enrichen our minds or get us closer to our personal goals. Those personal goals can be to start your own business or perhaps to retire early? Or maybe you would like to travel and see the world? You could do that, for example, by getting a job as a reporter or a wildlife photographer? All it takes is determination and the willingness to look at your career from another angle.

I do have to mention that, people who want to start their own business, are always in the wrong career, no matter what job they choose. They will never belong, except in their own business. If you dream about your own shop, you'll feel great when you have it. You'll never feel great if you don't have it. But in order to get it, you need money. That money can be obtained through a regular job, working for someone else. There might be other ways, but this is the most commen and easiest way.
But even though the job you have to do isn't what you want to do for the rest of your life, you can turn it into a positive experience. Look at it from another angle. Become one of category 2!

How? Choose a job that resembles what you want to do as an enterpreneur. That way, you can learn from their mistakes, in stead of making your own.

Taking action

If by now, you still don't know whether you're in the right career or not, I can tell you that you aren't! Every job has it's bad moments, don't let that fool you. But if you want to belong to 1 of the 2 categories in the previous paragraph, you need to take action and find the new job of your dreams or the new job you need.

This is what I have done:
  • writing down the positive parts about my current job
  • writing down the negative parts about my current job
  • find all jobs available for my degree and try to match as much positive parts as possible to that job <- This is where I could improve, by looking beyond my degree.
  • ask a lot of questions in the job interview, to find out whether those positive parts are there
  • turn the conversation in the employers favour and take the job anyway <- You should not do this! It's where I fail so far.
So this is what I should be doing(*) for my next job search:
  • write down the positive parts
  • write down what experience I could use to improve myself
  • match those values to ANY job available in my region
  • deny a job that doesn't meet the requirements
If you do that, you'll have a harder time to find a job, but an easier time to like and keep a job. It's the long and difficult road to finding the job you love.

(*) I did say 'should', because I kind of belong tho the second category and I have other plans now, which I will explain some day in another post.

Conclusion

So now you know that you could be in the wrong career and that this is what makes you feel bad at your current job. It makes you perform under your personal standards and will either get you fired some day or keep you miserable for the rest of your lives if you adapt to the situation every time.
I also talked about finding a job you like or looking at jobs in terms of tools. In the next part, I'll tell you all about actually getting fired and how you should react.

Sunday, April 18, 2010

Blog header redesign

I'm currently making a new header image for the blog and I'm experimenting with it.

Sorry for the inconvenience this might cause.



I also created some other artwork.

Getting fired - part 2

Look like a hard worker

As I explained in the previous part, it might be possible that you are a hard worker and still your boss seems to think you don't work hard enough. It's all a matter of perception. What your boss thinks is much more important than the reality.
A lousy worker can get a promotion, while a hard worker may not.
All that matters are 2 things:
  1. There have to be results.
  2. You need to look like you're working hard, regardless of the fact that you are working hard or not.
The first thing is obvious: if you don't work, there are no results. If you don't work hard enough, the results are poor. And results show up after a certain amount of time and it's the results that matter to your boss. Good results mean your boss makes more money. More money makes your boss happy.
The key here, is to make sure you get the work done in an acceptable period of time. But do not overextend your limits to impress the higher-ups. Do not let a promotion interfere with your private life or your health. After all, isn't your private life the very thing you are trying to support, by working?
So get things done within a reasonable amount of time, but let that be it.

The second one is very important for employees. I never thought about this myself, until I read an article about it (on http://www.vacature.com, but unfortunately I can't find the exact article anymore). But here's what I rememebered from it: what you can do to appear busy.

  1. Start your computer up immediately and spread some papers over your desk. Do this before getting your first coffee/glas of water.
  2. When thinking about a solution for a problem, it looks like you're not doing anything. Always have a piece of paper with you and write something down or pretend do be writing something down, whenever you're stuck. It gives you extra time to think, while still appearing busy.
  3. Always have your mail client open. Switch to the mail client and write a mail if you need to appear busy, but can't for some reason.
  4. Walk around. A lot. Go get a glass of water, don't print all information at once, do it in several times so you need to go to the printer a lot.
  5. When getting a drink or going to the toilet, always walk with a fast pace and with your shoulders slightly forward. It makes it look like your upper body is moving faster than your feet. Kinda like you're thinking fast and your body can't seem to keep up.
I'm sure you can invent more ways like this. It's an important part of work. That's something I learnt in school: it doesn't matter how well you know something, all that matters is that you can convince the teacher that you know it. That's why I really don't like exams in school. They put too much stress on you, let you work in conditions that are more difficult than in real life work situations. The result of this is, that some talented or hardworking people get bad grades, all because the stress or unrealistic conditions makes them underperform. Or they may know the theory, but have a hard time appearing like they know the answers.
It's all about perception. They say: 'Nothing is as it seems' or 'Don't judge a book by it's cover', but what manager will take the time to look under each employers cover? On a per project basis, I mean? They don't have the time for that. So it's all a matter of appearance. You need to look like someone who knows what he's doing, even though some projects might be a bit beyond your knowledge.

Be a team player

Also don't be affraid to ask questions. Don't do it by mail, but walk to the persons desk. It will make you look like a real team player and you get some help, which will improve your performance.

Don't overdo it though, you may end up looking like someone who doesn't know what he's doing. It's all a matter of balance. There's balance between work and your private life, balance between giving in on your employers wishes and those of your own, respecting the clients opinion versus respecting your own knowledge, being lazy and being a workaholic, ...
Try to find the point where you are just bearly on the positive side of the balance. It won't make you advance faster in your career, but it will keep you in your job long enough, without putting too much stress on your shoulders.

Conclusion

We have talked about being fired and the fact that you can see it coming and about what you can do to avoid it. I have also given you tips on how to look like a hard worker. But it looks like I'm gonna have to make a part 3 and probably more, because in the next post, I'll talk about another way to fix the problem and I still need to talk about how you should react in case you actually get fired.

Friday, April 16, 2010

Getting fired - part 1

What do you do when they fire you?

As I mentioned in my first post, I'm currently at my second job. I got fired from the first job I got and I would like to take this opportunity to explain how you should react in such a situation, should it occur to you.
Being fired can have many different reasons. These days, the economic crisis gets used a lot by companies to 'let people go' or to 'restructure'. But there are also other reasons to get fired. It's not always easy to know why.
I will try to give some tips that might help you avoid this scenario as good as possible, at least for the part where it could be prevented by you.
But it's not always possible to avoid it and it's not always the employee's fault. That's why I'll try to give some examples and give you some ideas of me, that might help you through the difficult period that emerges in case of you loosing your job.

Can you see it coming?

In some cases, where you have (some) influence on the situation, you can see it coming. They usually give you warnings in advance, tell you to work harder, etc. They usually do this, by taking you somewhere private to talk about the way you work or about your results. When this happens the first time, take it as a clear sign that something is wrong.
This is the time to investigate what is wrong. They usually tell you this, but if something is not clear or you do not agree with something, ask questions. Use this time to find out what they think is wrong, what they expect and whether you might be doing something wrong.
Always stay calm and NEVER get angry. Do not try to go into the offensive. Don't do this at all during the entire conversation! Not even after. If they think something is wrong, then something is wrong. I'm not saying it's your fault, but something is wrong and now is the time to find out what and to try to fix it.

Fixing the problem: work harder?

Suppose they want you to work harder. This is a classic. Why? They always want you to work harder. Owning a company is strictly bussiness. Employees are not friends, they are what make the boss rich. The harder employees work, the more money the boss makes. That's how simple it is.
So when they want you to work harder, it either means that:
a. They know you can do more then you are doing now.
b. You aren't working hard enough.
c. It doesn't look like you're working hard enough.

I'll explain these in detail.

a. They know you can do more then you are doing now:
Sometimes, you might work extra hard to impress some of the higher-ups. It's not a good idea to do this. The reason is simple: if you show you can work extra hard, they will expect this behaviour forever. They saw you could do it before, so why don't you do it all the time?
This is also a problem with the standards that companies require from employees. They expect too much... because somewhere along the line, many have worked too hard, just too impress higher-ups. Maybe at the expence of their own health, causing them to have a burnout or causing them to quit their jobs to escape the stress they brought on themselves. But the damage is already done, the standards have been raised for other employees. The standards can be raised easily, but they can not go down easily at all. This is probably because of the greed in the corporate world, though that's just my opinion.
In any case, the message is clear: Never force anything. It's not healty. If you allow things to come naturally, everything will go smoother.

b. You aren't working hard enough:
Here's a thought. It's not easy to accept this, but maybe you're just not working hard enough? Look at other employees. How are they working? Remember the previous point: some are working too hard. But they can never keep it up. Keep looking at other employees for a long period and try to see how hard they work on avarage. Try to work just as hard.
Perhaps you're a worker who needs to maintain an avarage through elektronic registration. In this situation, you don't have to look at other employees. Try keeping a score of your avarage and try to beat your own score every time, until you get to the point where they are happy enough.
Don't force anything, but work for your money. Nobody likes freeloaders and all employees are in it together.

c. It doesn't look like you're working hard enough:
Now this is the tricky part. Perhaps you work very hard. You're at max speed. But then they tell you, they are not happy with your performance, because you don't seem to be working as hard as the others. But you know you work hard, you go home tired every day from trying your best. Why do they say you don't work hard enough?
I can only speak from personal experience here, so I'll be giving an explanation based on a desk job (standard 9-5).
If you're sitting behind a computer all day, what do you do an entire day? You might say: "I wrote 2 reports, checked my e-mail, responded to several mails, wrote an application, tested it, etc.". Ask a construction worker what he thinks you did and he might think: "He/she sat behind a computer all day, fumbeling with the keyboard.". They have jobs where you can see them being active, doing something... if you have to solve problems to make a living, you need to think. Thinking is nothing more than sitting and using your brainpower. It doesn't look like you're doing something!
And that's precisely the point. Your boss sees the exact same thing as the construction worker. He might know, in general, what projects are being worked on, but he does not know what you are doing exactly. He only cares about results and those results only show up after projects are completed. So you need to look busy in order to make it look like your working hard, regardless of wether you're working hard or not!
In the next post, I will tell you how you can do that.

Thursday, April 15, 2010

Another journey to follow

Are you interested?

I'm starting a blog that will document my road to financial independence. Feel free to look around and who knows, you might find something interesting here. I'm not trying to sell anything, there is no scam. I'm just keeping a journal to document my journey.

The reasons behind the journey: school


I never really thought this hard about personal finance until was in college. The more I went to college, the more I disliked it. The problem lies in the fact that all teachers want you to do assignments for their own subject, without thinking about the other work we need to do. You need to prepare exercises for every subject you get on Monday, which may or may not compomise your weekend if you have a lot of classes on Monday.
The result? No more free time. All you do is study and work, just to get your degree.
I was determined to get that degree, mostly because I already spent several years studying and I did not want to waste those years (and for other personal reasons too, but I'm not gonna go into that). But when I started my last year, I wanted it to be over as soon as possible, so I could start to work for money. Many others didn't want to work yet and after 4-5 years of studying, they still wanted to study more. I didn't understand then and I still don't understand.
It's not just the loss of free time, but also the exams that make studying a bad thing. You work hard during the year, to satisfy the teachers only to be stressed out for more than 3 weeks during exams in order to learn it all again, in a very short amount of time. Humans where not build to have that much knowlegde in their head, that's why we invented databases, elektronic documents and the internet. Exams are just not healty.
And the longer we live, the more information students need to remember... so it just gets worse.
And do you think that's the worst? No! You don't get paid for it... worse, it costs a lot of money to get through that. And all that, just to get a better chance to find a job that pays more?

The reasons behind the journey: work

School has been tough, but I was glad when I got my masters degree. Not because of the degree itself, but because I could finally quit school and start earning money.
By now I already knew that the way our society works, did not compute with me. Something was wrong. I just hadn't figured it out yet.
And then came my first work experience. It was a real eye-opener.
For my first job, I was a software engineer for a big animal nutrition company. A standard 9-5 job, sitting behind a computer all day. Seems logical, because I studied ICT in school. I did my best to do well, but I never got a lot of good comments. It seemed like nothing was ever good enough. Sure, I had to develop applications on a system that was different then every other system I knew (AS400), which made me a little less productive, but still...
Add to that, the fact that my boss and his boss where fighting a lot... it made the atmosphere over there a bit unpleasant. I kept wondering if this is what my life was gonna look like from now on. Studying 5 years, to end up here?

Finding work you love

During that time, I started to look up stuff about "finding a job you love" and related information. It turns out that only 10% of all people have a job they love. The others either don't or they're lying (to you or themselves). That's information I gathered from studying many different articles I found by searching the web.
But I started following some of the advice I found and did the following:
* list everything about your current job that you like
* try to find out what you want from a job
* try to match what you want, with your skills

Especially the second one was difficult. I like programming, but it appears that I don't like it when I have to do it 8 hours/day on software I have no interest in. This is still a problem for me today.

So now I'm at my second job, working for a smaller and more modern software company. It's a different atmosphere, which is an improvement over my previous job. But I still have the same feeling. The switching jobs has learnt me a lot, however, and it got me thinking even more.
I'm no longer tied to a particular job, I use jobs as a tool to get to where I want to go. (I'll explain this in detail later.)
And during the last period of my previous job, I started to read articles and blogs about financial independence. I got inspired and wanted to learn more about this.

Financial independence and early retirement


It was more of a dream at first though, but maybe it could become reality? I needed to do a lot of investigating, which led me to several interesting articles.
The most notable where:
* HowStuffWorks: How to make a Million Dollars
* HowStuffWorks: How to Retire Early

They thought me the secret of compound interest. Because I used to like saving and I was never one to spend much money, I already had money in a higher interest saving fund. But I knew I had to do more then that to make compounding interest work. So I started to find ways to maximize my returns and gain money faster, while spending little money.

Conclusion


There are some of the conclusions I made while starting my journey to financial independence:
* School prepares you for a job where you are stuck working for the man.
* Working a regular 9-5 job means making other people money.
* It's very difficult, finding a job you love. My main interests and hobbies will not get me a job.
* It's possible to become financial independent.

This article was a quick summary of a whole heap of information. I made it to let you know a bit why I started the journey to become financially independent. There's a lot more to it off course and I haven't touched all subjects yet, but I hope you get an idea now what my blog is about. The road to financial independence is long and difficult, especially when most people around you think differently or don't believe you. If you want to take the journey, I'm here to explain what I go through, so you can now that you are not alone. After all, if you read this all the way to this point, you must be interested in this journey too, right?