Monday, November 6, 2017

Startup Advice

I've seriously been neglecting this blog mostly because I've become overwhelmed with all of the other priorities in my life which have pushed updates further down on my never ending to-do list.  I actually have two other drafts on other topics started which I'd like to get to a some point, but I figured I'd get this off my chest while the ideas are fresh and the nerves are raw.

I haven't touched much on my involvement with startups, as they've all been stealth mode, early founder level operations, trying to bring an idea into reality from scratch.  I've been involved with six startups in the past seven years as the primary technical architect, with only two that are still active, one I'm no longer a part of.  Combined, these startups have burnt through over $1 million, though only roughly about $650k was on my watch.  I've sunk at least 4000 hours of my own time into them with nothing to show other than failed prototypes, unpublished apps, dozens of patents.

I've learned many hard lessons through trial and error.  This blog post is my attempt to compile my hard-fought wisdom as I've failed to find a singular online source or book.  I was looking for something that I wish I could have read back in 2011 when I started pursuing these ventures.  Therefore, here is my distilled lessons learned.  This is by no means a complete list, and it assumes the reader already has some basic understanding of startups and related terminology.

1.  Limit your partnerships.  More the merrier isn't true when it comes to startups.  Ideally, you are better off not having any partners and running the show yourself.  If you must, no more than 1 or 2 equal partners, as you will quickly find yourself in a situation where no decisions can be made without weeks to months of deliberation.  Half of the my failed startup attempts died because of this; too many chefs in the kitchen, no real leadership or direction. There has to be a singular vision which is best set by one person, yourself.  Feel free to bring on a few advisors, but make sure they understand you are the boss and they are just providing insight and perspective.

If you aren't a leader, but have a great idea and maybe some way to start building it, find yourself a real leader and step aside and follow.  But, if you are the type "A" personality, paint a vision with real goals and objectives planted with fixed dates; develop a clear timeline for MVP and launch and stick to it.

2.  Don't mix business/money with friends and family.  Seriously, you'll regret it when you burn through your uncle's seed money and don't have anything to show for it.  Don't hire friends or family as you put the underlying relationship in jeopardy and are asking for trouble.  Especially don't hire friends who don't actually know what they are doing when you really need an expert in that role.  I've also loaned money to several friends and family members and those relationships became strained.  Now, if I do give money to friends or family, it's a gift and I don't expect it back.

3.  Only work with professionals.  I've found that the one partner I'm able to count on who has never swayed in our original goals and vision isn't a close friend of mine, but merely a business acquaintance who I've always kept at arm's length, having very formal iteration with.  It's not a matter of trust, because trust doesn't matter much when opportunity strikes, rather our long term goals align and we are on the same page about our startup philosophy.  You are always far better off hiring someone qualified and keeping things professional than taking an informal relationship and expecting professionalism from it.  Don't take money from investors who aren't professionals; they won't be able to help you when you need guidance and they will expect unreasonable outcomes and likely won't be able to understand the true risks.

4.  Say no more than you say yes.  Turn down ideas that don't pass the smell test.  Be a skeptic and try to poke holes in it.  Do your market research first, competition analysis, market size, target customer, etc.  If you don't understand these metrics and how they affect the likelihood of failure, you need to read more about the market you are trying to enter before you even start building. If I could go back, I would have said no to 5 of the 6 startups I became involved with; I never fully believed in them because the risk to rewards ratio was too far skewed out of our favor.  My old mentality was "let's see what sticks, it's a numbers game", meaning one of these startups will work out if I keep on trying different ideas.  But that's wrong for many reasons, you simple don't have enough time to try all the ideas, so you must figure out how to test each one quickly and zone in on the golden idea.  Don't do any startup you don't truly believe in.

5.  Launch with MVP in 4 weeks or less.  MVP, or Minimum Viable Product, that means the most bare bones version of what you are trying to build.  Even if it sucks, just launch anyways and quickly improve it, but launch first.  If you can't launch in 4 weeks, you don't have an MVP worth building, go back and keep on editing the complexity down. KISS, Keep It Stupid Simple.  Once you have a product out there, you can start collecting feedback and data to quickly improve, which is far more valuable than countless team meeting reviewing and changing designs with no launch in site.  To clarify, don't start your MVP until you have sufficiently convinced yourself that it's worth building.  More on that later.

6.  Stay lean and bootstrap.  Until your MVP is in production and you can secure additional funding or are cash flow positive, don't break the bank.  Keep your costs low by contracting internationally when possible.  If your MVP is too costly for you to cover, build a solid business plan, a well thought out pitch deck, and a proof of concept (PoC) that you can show to investors.

7.  Don't bother with patents, contracts, titles, etc until you have an MVP.  I've spent over $4500 alone on attorneys just going over contracts and patents.  I was part of a startup that spent over $300k on attorney's fees for international patents.  Not even worth it if you don't have a viable product.  The one thing you should have is an NDA (Non-Disclosure Agreement) which protects you from having your idea stolen.

8.  Execution is more important than the idea itself.  I'm always amazed when I see these half baked ideas get funded by billionaires and I say to myself, "I could have thought of that!"  And so did countless other people.  But execution of strategy is what really wins in startups, it's having a solid business plan, go-to-market strategy, short iterative improvement cycles, addressing customer and client needs as they arise, while developing a solid marketing brand with smart targeted ad campaigns.  Build your company in the correct order, a tested business solution first, then viable product, then legal protection.  The one startup that blew $300k on patents did so before they ever had a viable product.  Once they brought me into build that product, it turned out the product didn't even solve the business problem in the first place and everything done up until that point had to be scrapped.

9.  Fail fast, fail often.  If you have a great idea, don't wait for the MVP to be built, quickly try to formulate all the pieces for a solid startup concept.  Think holistically, revenue models, market penetration, capital & operational expenditures, servicing and customer support, etc.  Do a Proof of Concept and try to poke holes in it.  The sooner you can find potentially unsolvable red flags, the sooner you can stop waiting any more time on that failed idea and move on to the next good idea.  Make sure you do a post-mortem and figure out what went wrong and why it failed.  This knowledge of failure is what success is built on. For every successful company, there are hundreds of failed attempts which helped create it. It's vital that you learn from your mistakes and don't repeat them.  This is my new strategy, I'm now aiming to quickly build a skeleton framework to see if there are any major unsolvable flaws and deciding quickly to move on or try and work through.  Being overly persistent with a losing idea/concept will get you nowhere; like in poker, you are better off folding when you know you have a bad hand.

10.  Don't worry about revenue generation initially.  I know this contradicts what I just said about staying lean, but usually with most products and ideas, there's a critical mass number that needs to be hit before you can start charging for the product or service.  Develop your revenue model for later after critical mass has been reached, but first focus on producing real value, only then can you charge for it.  This is how to get past the chicken and the egg problem.

11.  Build your network and keep in contact with movers and shakers.  The startup landscape is all about human capital and you won't succeed if you try to do everything yourself. You will fail at least a few times in trying to build something successful.  You'll encounter professionals and experts who can help you and advise you along the way and it's important to keep these connections for when you might need them later.  An opportunist will use their connections for a quick buck in the short-term, while damaging these relationships in the process and potentially burn those bridges, preventing future opportunities.  A wise networker is playing the long game, offering true value to their connections with nothing expected in return. They become sought after and opportunity will flow to them.

I helped one friend raise $1.5M in a lunch meeting because I was on good terms and had the respect of a few investors in my network.  I periodically touch base with my list of investors and entrepreneurs and try to give advice or contacts, or any other way I can help provide value.  I genuinely want them to succeed, not for selfish reasons, I don't expect anything back, but I can bet you they think of me when they need someone of my ability.  He who burns his bridges at the first sign of trouble is foolish and near-sighted.

12.  Trust your inner voice.  If you believe in your idea and have put serious thought into it, don't listen to the naysayers.  It's one thing if a trusted adviser has serious reservations about a decision, but it's something else entirely if some random stranger thinks you can't succeed.  Once you develop your vision, see it through execution to completion, be it successful or failure (see rule #9).

13.  Don't actively work on more than one startup idea.  It's better to fail at the first one and move on to the second one.  There are exceptions for this, but mostly, if you are trying to build two MVPs at once, both will suffer.  Be realistic about your level of effort and don't bite off more than you can chew.  This is especially true if you are a family man and are trying to maintain some semblance of a work/life balance.

Friday, May 20, 2016

How to buy and sell cars

We Americans value our automobiles perhaps more than most other nations because we usually have to drive several times a day to get work, the market, see our friends etc.  Public transportation in most areas is subpar and taking a bicycle only works within a 5 mile radius, unless you get an electric bike (which I recommend).  Whatever your reason is for owning a car, don't think it's the only way to commute; I try not to drive when possible and either walk or take my bike.  I even have a trailer for the kids too.

That said, the need for at least one car per household is pretty much a given.  Being a sports car buff, I've bought and sold more cars than most for my age.  I've even turned a profit on nearly every transaction because I've developed a method for buying and selling cars.  It's really quite simple.  The main objective is maximizing value in both the purchase and sell of the vehicle.  Value isn't a concrete term and really needs to be broken down into three branches when it comes to autos.


1) Perhaps a car's most important valuation metric is the make, model, year, trim, and feature set.   While this is obvious to most readers, I'm spelling it out for my 15 year old self here.  Make and model are easy enough to understand, but trim and feature set is a bit harder to identify on car ads if the poster didn't put enough information in.  Your best bet is to look at the car's VIN number.  This unique ID is created as the car is built and can be used to lookup features and trim as well as model & make.  It's broken up into three parts, Manufacture + Model/Trim/Options + Serial number.  Edmunds explains how to decode these.

Every car is made to a specific generational build plan which can change even multiple times per year, so sometimes you need to reference the VIN number when determining which generation a car is.  The absolute value of car (min to max range) is set by these metrics and obviously can't be changed.   Resources such as Kelley Blue Book can help you determine the min and max value range.

A car's warranty is valued linearly; selling a car with 1 year left will fetch a much higher price than a car without a warranty.  But warranties are overrated; most independant mechanics do just as good of job as the dealerships at less than half the cost.  Out of pocket repairs are usually cheaper than the difference paid for a car with a warranty.  That said, if you really want the warranty, certified preowned cars come with a new warranty and offer peace of mind for those who can afford the convenience.  When selecting a car to purchase, the older the car is, the more reliability information and user reviews accumulate which makes things much more predictable in terms of cost of maintenance/repairs and what maintenance items to look for when buying a car.  You can find resources on reliability ratings for cars from Consumer Reports, EdmundsAutotrader, and MSN Autos.

2) The second most important component to a car's value is the wear/tear and previous maintenance.  For this, mileage is a bigger factor than age, but more importantly, what kind of miles are they.  Highway miles are better than stop and go daily commute miles, which are still better than city miles, which are obviously better than track miles.  And preventative maintenance is crucial in preventing bigger and more costly problems later down the line.  For these reasons, assessing the previous owner(s) is important to see how well the car has been driven and treated.  Because that isn't always possible and sellers can lie, it's best to get a vehicle history report on any prospective car you are seriously considering buying.  Think of Carfax, but not $25 a pop, I use CheckThatVIN which is only $3.50.

While this report should tell you about previous accidents, unreported ones will not be on a vehicle's history report.  It's always best to have a private party seller agree to have the car inspected by a mechanic who will be able to determine if the car was in a serious accident and if it was repaired satisfactorily.  They also should be able to tell if the car was maintained correctly, though they may not know about specific maintenance details for that year/make/model/trim.  I recommend looking up the maintenance schedule in a Chilton's manual (also might be able to get it from this online library) and finding a mechanic who specializes in that car's make/model.  If you are trying to sell your car, you should already own the specific Chilton's manual and if you are going to buy one, I'd also just pick it up on amazon as part of your research.  The more you understand the car, the better you can assess it's value and thus save you money.

3) The final metric in value is really more for selling cars than buying --aftermarket modifications.   Aftermarket upgrades include window tinting, custom interior and lighting, rims, body kits, head/tail lights, sound systems, performance upgrades, suspension modifications, aftermarket accessories, etc.  Unless you are the kind of person who is looking for a heavily modified racer or upgraded offroading vehicle, you likely are looking at stock (unmodified) cars to buy or have an unmodified car to sell. Most of the time, aftermarket mods don't add very much value to the car.  That said, many people (buyers) are attracted to certain upgrades on an emotional level, especially if the modifications take some work to install and are done correctly.  Here's my breakdown of the top upgrades I usually see, cost, perceived value (what a seller might think) vs real value (value to you).

Modification Cost Perceived value Actual value
Window Tint 200-500 75-100% of cost 25-50% of cost
Custom Sound System 200-2000 75-100% of cost 25-50% of cost
Rim + special tires 500-5000 75-100% of cost 0-25% of cost
Interior mods (seats, lights, mirror, pedals, floor mats, etc) 10-1000 0-50% of cost 0% of cost
Engine performance mods (intake, exhaust, cams, clutch, etc) 500+ 50% of cost 0-25% of cost
Suspension mods (coilovers, lowering springs, etc) 200+ 25-50% of cost 0
Body kits 200+ 25-50% of cost 0

More on Perceived vs Actual values: many mods actually decrease the life expectancy and reliability of other components, such as suspension lowering, engine modifications, rims/tires.  The subjectivity nature of aftermarket mods means you can't assume everyone will like the mods and will immediately want to remove them and revert back to stock.  I recommend saving the original parts for when you are looking to sell your car.  When buying a car, I recommend purchasing stock only cars or only slight mods.  Heavily modified cars tend to have many issues.

Selecting a car

So now that I've spelled out vehicle valuation, let's focus specifically on buying.  If you aren't sure what kind of car to get, you need to first figure out what aspects and functionality you need/want.  Is a big trunk important? How about visibility?  Reliability?  Off road handling? Fuel economy?  Determine your priorities and rank them in order.  Pick the top 3-5 and use those as your checklist when evaluating cars.

Note that I specifically left price and mileage off the list of priorities.  Price is determined by your budget --you should have a number in mind in what you can afford which includes insurance and fuel costs.  You can usually find total cost of ownership including expected maintenance in your research (used the links above as a starting point).   You will have to compromise on the car's age (year model generation) and mileage to get the price you want.  There is always a sweet spot and it takes some work to find that.  Generally, newer cars with higher miles are actually more reliable than older cars with lower miles.  This is because newer cars are usually more reliable in general, usually only have 1-2 previous owners, and someone who drives many miles per year are usually driving highway miles (good).  Those miles take a major toll on the perceived value (KBB) and allow you to get a good deal.

Narrow down your research to no more than three models and go test drive each of them.  There are several ways to do this.  Carmax is a great place to start since you can possibly see all three models there.  I would never buy from carmax as they charge a premium like all used car dealerships, but don't tell the sales associate that.  Go with a friend if you are worried about being strong-armed into a sale and walk away if they get pushy.

If you can't find the make/model/generation you are looking for, try to find a private seller who will let you test drive it.  Make sure tell her/him that you are looking at a few cars and you'll need to think about it, but really make sure you drive at least one car you aren't planning on buying of the same make/model/generation; this way you can make sure you have selected the car you want correctly.  If you can't decide on just one, pick up to three combinations which will work for you and search for them.  Try to narrow it down to just one if possible though, this will save you lots of time in searching.

Car Search

Once you have a good idea of the make/model/year/trim/options of the car you are looking to get, you can now start looking.  Ebay is usually overpriced and a bad idea.  I've had the best luck with Craigslist and Autotrader.  Sometimes even cars parked on the side of the road with for sale signs are very good value as the owner may not know the true value of their own car (they aren't tech savvy and haven't researched it).  In doing your research for your car, you'll know what price range you should expect to find.  Beware of cars priced far below your expected range, it usually means there is something wrong with the car.

Don't be afraid of buying from a far away seller, out of state even, however, you'll want a full money back guarantee from the seller (usually 2-4 weeks); most dealerships and even some private parties will do this; get it in writing.   If you are planning on getting a certified preowned car, you'll usually want to buy out of state because you'll typically get a better price than if you were to buy locally even after the price of shipping the car.  Car shipping is almost always cheaper than driving with a friend or flying out and driving back.  Some dealerships will even drive it to you; I bought a car from a dealership over 120 miles away and they drove it to us for free.

Speaking of dealerships, I've found some of the best deals buying used cars from mismatched new car dealerships.  They too post ads on craigslist and autotrader which is really the only way to shop at dealerships.  I bought a Mitsubishi from a Chevy dealer, a Toyota from a Honda dealer, etc.  These cars are trade-ins and because the dealer pays so little to the new car buyer for their trade in, they are able to sell it really quick below market value because they want to get the car out of inventory asap. Don't confuse dealerships with used car lots, they are a horrible place to buy cars.  They usually accumulate lemons and they have to mark up the cars because they are purchased from private parties.

If you can't afford a certified preowned (or used) car from a dealership, look at private listings for cars with as few of owners as possible.  One owner is the best of course, especially if they have kept good records of maintenance and repairs (even better if there are no accidents).  If you aren't buying a certified car, insist on having a machine look at it as a condition of sale.   Try and find a mechanic who specializes in the car's make/model, especially if you are buying the car out of town over the phone.  I bought a car in Salt Lake City, UT from a Chevy dealer and had a Mitsubishi specialist that I found on craigslist go and inspect the car for me. I paid him $80 via paypal and he gave me a list of changes made (different from stock), issues, major maintenance items which had/hadn't been done.

One of the most important tests he did was the compression test, which is testing each cylinder for any leaking.  This is really crucial for older/high mileage cars as the seals wear down and require an engine rebuild ($$$$).  Drive train/transmission, brakes, suspension, steering, wheel wear, etc. are all important things to have your mechanic check.  Finally, ask them if you would buy this car themself based on the condition of the car.  Get a second opinion if you don't like his/her response or you feel like he/she wasn't being honest.

When you've found a car you wish to buy from a private seller, make sure registration is current and the VIN is clean.  Use a VIN checking service and ask to see registration.  Make sure the car will pass a smog check, even better if it has passed one in the past 3 months.  You'll have to smog it anyways when you register it with the DMV if it hasn't otherwise.  Most importantly, make sure the owner has the title to the car.  This is usually a pink paper which has the owner's name and address along with the VIN and mileage at last sale.  Double check the seller's license to make sure that he/she is the actual owner of the car.  Some people will try to sell you a stolen car.

Closing the Deal

While you are searching for your car, you should also figure out your financing.  If you are planning on paying in cash, make sure you go with someone else to make the transaction and meet at a neutral public place like a the parking lot of a grocery store, gas station, or coffee shop.  I'd also recommend a cashier's check as it's safer than carrying around cash.  You obviously don't want to get robbed.  Even better is meeting at the DMV; you'll have to go there afterwards to finalize the transaction officially anyways.

Make sure the prices you see are around the numbers you see on KBB.  Generally, there is some negotiating leeway with dealerships and you can almost always save 5-10%. First ask how long the car has been on sale for, then ask how much of a discount you can get if you take it off their hands right now.  With private parties, start at 10-15% lower and let them counter.  Try to meet halfway if possible.

If you are planning on financing, use a credit union for your loan if possible.  You'll get the best deal and they generally are very great to work with.  I highly recommend Penfed. Plan on having at least 10% down and enough to cover tax, title, and registration, usually about another 6-8%.  You'll have to pay these even if you are buying in cash at the DMV.

All that is needed when buying from a private party is getting the transfer of title filled out and exchanging funds.  There is a portion of the title which is removed that the seller keeps and mails in to the DMV or can submit it online.  The other portion you bring with the car to the DMV to handle the title transfer.  If you are planning on going to the DMV that day, ask that the seller submit the change of title online and print out the confirmation so you can bring it with you to the DMV.

If you are buying from a dealership, they'll handle the change of title for you, but you may still have to go to the DMV.  An unrelated pro-tip, if you are a AAA member, you can just go to an AAA branch office instead of the DMV for title transfer.  This is a much better and quicker experience than the DMV.

Once the car is yours, if it's not a certified preowned car, I recommend bringing it to your mechanic for a tuneup, oil change, brakes/tires if need.  If you do fine major issues with the car which were misrepresented by the seller (if the car is sold "AS-IS" then you have no legal recourse), lemon-law does cover private sellers and you can lawyer up.  I have never gone down this route before as I make sure I thoroughly inspect the car before I buy.


When it comes to selling your car, always sell privately.  Dealerships will never give you top dollar and will try and rip you off.  It's worth the time to sell it yourself, especially if you've made aftermarket modifications to it.  You want to spend time and detail your car, inside and out, even the engine bay. You can pay a carwash to steam clean your engine and make it look amazing.  Then take some really great photos of your car.  Make sure you get a photo of the mileage, engine, wheels, front, back, and sides.  You can never have too many photos.

Be very descriptive with your ads, get the original verbiage from the manufacturer's descriptions along with what the feature brand new would costs and list it in a table.  If your car doesn't have a warranty any longer, make sure you include "SOLD AS-IS" in the description.  This will save you from the buyer changing their mind later.  Get a KBB private party buyer estimate (don't use the private party sellers estimate, it's actually lower than the buyers).  Add on your aftermarket modifications.  Finally add 5-10% more as you'll need room to negotiate down.  I recommend making both a Craigslist and Autotrader ad, the $75 "list it until it sells" works wonders I find.

If you have all of the receipts for maintenance and aftermarket upgrades, put them in the ad and include them with the sell of the car.  This usually seals the deal in justifying a higher than market sale price. If you are selling a car you bought new, include all of the original paperwork from the dealership.  Include the Chilton's manual and any special tools specific to the car (like the rim lock lugnut).  List this in the ad and the buyer will know you took good care of the car and the add value is justified.

When showing the car, always meet in a public place and take a picture of the person's license before they drive the car, make sure they have insurance as well.  Always go with them and direct them where to drive.  If you are selling a manual transmission car, make sure the buyer knows how to drive stick.  If for any reason you feel uncomfortable with how the buyer is driving the car, ask them to pull over and switch seats.  I've had to do this once with a kid who lied about being able to drive stick.   I still ended up selling him the car aways, but I wasn't going to let him learn how to drive stick while it was my car.

Price negotiation generally starts out with the buyer making an offer lower than asking.  Usually they'll accept a counter offer half way between your asking price and their offer.   As the seller, you have the upperhand if you don't need to sell the car right away. If the buyer really wants it, they'll cave and let you take a few more hundred bucks from them.  I've generally been able to sell cars 10-20% over fair market because I don't cave.  Sometimes it takes weeks to sell, but this is why you should list your car early and high and only lower your price as it gets closer to the time when you need to sell it.

Side Income

The more you buy and sell cars privately, the better you'll become at it. If you learn how to fix repair simple things like basic body work, you can easily turn it into a side hobby which makes a little extra cash.  My own estimates are in the range of $25-200/hr depending on what kind of cars you are flipping.  If you get really good at identifying value and are first to act, you can usually get really sweet deals on cars at auction.  Also, rare and unique cars especially can be sold at a premium.  If you are thinking about making a business out of flipping cars, try and focus on a particular specialty, make/model, etc. so you can become very good at seeing the value and making a profit.  Don't forget to factor in taxes into your calculations.   If you sell more than 4 cars a year, you likely need to apply for a permit to sell used cars.

Thursday, September 24, 2015

Most Influential People - Jim Rohn

I was exposed to Mr. Rohn's self help material in the form of a six part cassette titled "The Challenge to Succeed".  My dear friend loaned it to me when I was 21 and in college which I believe was loaned to him from a mentor or friend.  The knowledge packed into that program completely changed my life for the better.  It was the right material at the right time.  I would have been too immature or unreceptive to the message had I received it sooner.

Perhaps his most radical idea which has become cornerstone in my life is what he calls "The 5 major pieces to the life puzzle".  They are:
  1. Philosophy - The sum of your knowledge
  2. Attitude - How you feel about what you know and the emotions behind the knowledge
  3. Activity - The manifestation of your ideas into reality.  Actions, habits, etc.
  4. Results - Feedback loop for self improvement and self evaluation.
  5. Lifestyle - Making Joy and Happiness priorities in life; building and maintaining relationships.
Amazingly, I was able to find a video youtube hasn't taken down yet of one of his weekend lectures which would have cost > $500 to attend.  In this video, he tells you about who he is and how he got to be where he is, which is a very interesting story alone.  He'll spend a good 30 minutes on each of these key points above as well as cover a ton of other things.

Yes, it's over 4 hours long and it covers a ton of material.  But if you seriously want to absorb the content and allow it to alter how you think for the better, than I suggest dedicating a full half day to it.  Grab a notebook and pen and take some notes too.  Then listen to it a few times over while driving or at work.  Let the ideas seep into your subconscious thoughts and you'll suddenly find yourself a different person.  

That's exactly what happened to me.  I still listen to this whole lecture occasionally, at least once a year.  So, without further adue, I give you my favorite business philosopher one of the most influential role models.  If you like this, I recommend all of his books and talks.  I've read and heard them all.

Walking the talk - Balancing quality of life with early retirement goals

I, like most Americans, am a materialist.  Perhaps more so than most.  I grew up with parents who earned slightly more than average, thanks to their entrepreneurship.  While they did have more freedom being their own boss and earned more than most, they also worked longer hours and happened to spend more.

Sure, we got to go on many vacations and enjoyed nice toys and went out to dinner several nights a week, but they worked well into the night, almost every night.  My dad especially would work 16 hour+ days often; I'd rarely see him daily for more than a few hours before I was in bed.  He'd leave in the morning before I was up nearly every day. What little time I did spend with him during the week was usually unmemorable; he was too tired to really play with us after working such long days. He also worked weekends often.

Of course he did all that he could, spending his free time taking us on trips and building things in his workshop.  My dad did what he thought was his best to keep up with the expenses and still be a good father. I argue that the opportunity cost he paid was too high however.  My parents spending habits have always mirrored their income, which is very unfortunate.  The more they made, the more they spent and thus the more they had to work.  They still likely won't be able to retire any time soon.

From what I just shared about my upbringing, I've concluded two things.  Number one, I never want my job to be more important than my family.  Secondly, I'd rather spend less and retire earlier.  The first point is pretty self evident, being the best father and husband I can be by doing all I can to spend as much free time with my kids.  And who doesn't want to retire sooner than later?  Even if you love your job, why would you desire the necessity to work due to bills?

Unfortunately, both of these goals seem to be at odds with each other.  One can pick a quick route to retirement by working several jobs or working hard at advancing their career.  Or they could take a job that lets them work minimal hours to cover their expenses.  Finding a balance between the two is very difficult when you have a family.  Had I spent my 20's working very hard and living very frugally and investing more, I would have been able to retire by 30.  On the other side, what I learned about myself and the experiences I had in my 20's are invaluable.  And now as a family man with two children, I no longer have that option.

My solution to the balance problem

So how does one strike a balance between advancing their career and earning enough, while making time to connect with one's family and friends?  The particular solution I've found won't work for everyone, but it may for many, especially in the rapidly changing economy of knowledge based work.

  1. Pick a career field that is based in knowledge work (i.e. a desk job) that involves a specialized skill set.
  2. Work harder on yourself than you do at your job, becoming more specialized in that area and an expert.
  3. Land a job with great pay, minimal work load, and negotiate 100% telecommute terms.
  4. Maximize your investments and minimize your spending.
Let me break this down.  Step one is pretty important as some lines of work will never allow you to work remotely, such as construction.  Most office cubicle jobs however can be done remotely, especially ones where work is handled asynchronously, like generating reports and analysis, or building code that doesn't require real time interaction over the phone or desktop sharing and doesn't have many meetings.  IT is great for this, but not all areas of IT lend themselves to such workflows.  The goal is to be able to be more flexible around when you can work, giving yourself the option of taking a 4 hour lunch to take your kids somewhere and then working later while they are in bed, etc.

Step two is my little gem I got from my favorite business philosopher, Jim Rohn.  By working harder on yourself, you increase your own value to the marketplace; your earning potential rises quickly. There are tons of free resources on the internet, free classes, books, etc.  Spend at least one hour every morning before you go to work studying and working on yourself, and I can almost guarantee you'll get a raise and promotion nearly every year.  I did better than that.  I've managed to double my income nearly four times over since I started working.  The core of my knowledge I use daily I didn't get from college, but self study on the web.

Becoming a renowned expert in your field not only lets you fetch high salaries and likely lets you negotiate telecommute terms, but you'll find that the high end jobs are typically less stressful and you'll likely do less actual work.  It's ironic how this works, but part of it is because you've become so highly skilled that you are able to complete work much faster than expected.  By being able to work remotely, and asynchronously, you can design each day to spend in how you'll spend time with your family and plan to get your work done in the most convenient way to you.

Taking a page from Mr. Money Mustache, step four is all about shortening your route to early retirement.  While I endorse what MMM preaches in finding gratification from things that don't involve spending money, I'm a materialist as I mentioned.  So I believe in delayed gratification; if you want a particular toy and you can afford it now without exceeding your budget, then go for it.  Otherwise, if you have to finance something, adjust your investment & savings budget, or sacrifice another necessity, it's probably better holding off.  The key is understanding all purchases in terms of how long they will delay early retirement and weighing the value.

So that's my current life balancing strategy.  I just got 100% telecommute again as well as a role with no on-call or after hours support, which means my time outside of my duties is mine.  This is very big for me since I've been on call at every job since about 2003.  One job I averaged 60-70 hours a week doing after hours support.  Never again.

That said, I'm involved with many other projects which eat into my personal time as my job is never my only source of income.  Landlordship, consulting, teaching, writing two blogs, and several startup endeavors just to name a few.  However, I still make sure that the responsibilities they bring take a backseat to my family.  The primary objective regarding maintaining work/personal balance is to keep your priorities straight.  It's not always easy to do this, especially if you love what you do and get sucked up by work projects and lose track of time as I do.  I find keeping photos of my family in field of view helps a ton since I'm a very visual person.

What I've found in progressing down my career path is an increased amount of freedom.  Becoming highly sought after by recruiters changes your thinking and sense of stability.  You aren't ever worried about being employed when you get daily phone calls and emails that are trying to sell you on their opportunities.  While I still keep my eyes open for anything that looks good, I've found a company that grants me exactly what I'm looking for, so nothing better has come along yet.

The other major piece to early retirement is minimizing spending.  I'll save the topic of budgeting for another post.

Thursday, August 6, 2015

Counterfit Curriculum Vitae

If you've very applied for a job, you likely have a Curriculum Vitae, known as C.V. or resume.  Perhaps you've slightly overstated the significance or accomplishments, framed minor achievements in different light to make you look better.  This is typical behavior for many applicants (34% according on one background checking firm) who are trying to make a huge jump in their career to a position they may not necessarily be qualified for.

But inflating your accomplishments is one thing, but outright lying about past work experience, education, job titles, or certifications will quickly damage your reputation and disqualify you from opportunities which you might have been qualified without the lies.  The prevalence of lying is perpetuated by the fact that there is no central "blacklist" that hiring companies can check.  Even past employers or job placement companies will never publish any defamatory information in fear of lawsuits.  Thus, those who lie can get away with it time and time again.

There's no shortcut to more senior positions; everyone must start at the bottom and work their way up in any field.  Sometimes rising through the ranks can be greatly accelerated by "working harder on yourself than you do at your job" as Jim Rohn puts it.  But you still have to put in the time and on the job experience can't be faked or replaced by any number of certifications or degrees.

While I don't condone any form of truth stretching as I feel that lying to yourself erodes your character and is not living consciously as well as immoral and unfair to others you are competing with, there are HR policies in most companies that you should know about that some take advantage of.  The biggest one perhaps is that most previous employers have internal policies about not not disclosing any information about your employment other than verifying your title and dates of employment.  While it's not law, most larger companies do this to again protect themselves from lawsuits. This includes not disclosing salary, reason for termination, disciplinary action, or even recommendations.

What this means is that one could lie about their salary history in trying to get a better offer.  While this might work to some extent, prospective employers can spot this pretty easily.  It turns out it's actually best to never disclose your salary history to anyone as you are more likely to be hurting yourself in getting a better offer.

Your CV should be a two page summary that paints you as a superstar employee, focusing on your work history, education, accomplishments, and achievements.  Highlighting your pros is not in any way stretching the truth and is what your CV is all about.  In many instances, padding numbers like number of clients sales or servers administered doesn't get you extra points; the fact that you did certain tasks is enough to portray competency.

What inspired this entry was actually what transpired out of a recent round of interviews I was brought in to participate in as an expert.  A very strong looking candidate's CV claimed to have very high level certifications and a degree.  When I noticed some irregularities in how the certifications were listed, I started investigating.  Not only was the certification numbers not provided, but the school which they supposedly graduated from wasn't accredited to award bachelor's degrees.  When pressed, they admitted to outright lying.

Even if you are able to land a job by using a fake resume, you are selling yourself short.  Most likely you won't be able to do whats being asked of you and you'll become over stressed and possibly mess up and get canned.  You could be found out as a fraud after the fact.  You'll miss out on the growth opportunity and other missed job offers better suited for your present skillset and abilities.  

Don't shoot yourself in the foot, do your time at the bottom of the career ladder, but spend an hour or two a day studying for that certification or take special training or do school part time.  Bettering yourself is the only way to shortcut your ascension to better paying jobs.

Tuesday, July 7, 2015

Budgeting 101: Credit cards are not evil - why I never use cash

The misconception that credit cards are evil is particularly bad for those trying to budget and track their spending.  We all know credit card debt on the other hand is very bad as it accumulates interest and can cost dearly if left unchecked.  So how does one strike the balance of benefiting from the financial tracking while avoiding accruing interest?

Paying off the card each month prevents you from being charged interest.  While this concept seems simple in practice, if you are struggling from paycheck to paycheck, this can be difficult.  Lets back up here and dig a little.  If you are living paycheck to paycheck, the chances are you are spending all of the money you earn because you're operating on what is known as a "cash-based" accounting mindset.

This means that you check your bank account (or wallet) often to see how much money you have before you decide to make a purchase.  If you don't have enough money, you don't buy something or you go for the cheaper option, whereas if you have extra money you'll splurge a bit and maybe buy something you don't need.

Even if you aren't living paycheck to paycheck, most of us do this naturally.  It's the most simple learned behavior from interacting with money, like kids with their allowance.  Sure you can save up for something big, but the quantity of money one has directly influences their purchases.

Accrual Accounting

The quickest way to get out of the paycheck to paycheck cycle is to upgrade your cash-based accounting mindset to the more advanced accrual accounting methodology.  This is a discipline that goes hand in hand with budgeting.  If cash-based is like taking the pulse of someone's heartbeat by hand, accrual accounting is using a full body monitoring system.  It takes more work to operating with accrual account, but the benefits are worth it.

Think about your bank account as a lake.  Water flows in (your income) and water flows out (your expenses).  If the rate of water flowing out is faster than flowing in, the lake dries up.  Accrual account is looking at the total spending vs the total income.  What accrual also means is that credit card spending is counted when the expense occurs, not next month when the credit card bill is due.  This lets you take advantage of your cards and earn points and miles as you use them to pay for everything from bills, rent, loans, to even your $3 daily coffee.

The more you use credit cards and keep them paid off, the better off you are for three reasons.  First, you earn all the points, cash back, miles, or whatever benefits you get from using the card.  These add up when all of your expenses are going through your cards. Secondly, all this spending and keeping your cards paid off dramatically increases your credit scores, enabling you to borrow more at better rates when you need to make big purchases.  And lastly, credit card companies automatically post each transaction to your statement, available online or even through the smart phone app.

This is really important because you can then download these expenses and put them in your favorite accounting software or just plan excel and figure out where your money is going.  This lets you make a budget and curb unnecessary spending habits.  It enables you to be honest with yourself and spend more consciously.  That $3/day coffee habit adds up to more than 3 times the cost of a coffee machine every month.

Thinking ahead

So instead of checking daily how much money you have in your account, you can load your budgeting app or spreadsheet and see how far over or under you are for your budget that month.  If you budget in automatic investments or transfers to savings, then you'll be able to save every month.  And if your income is volatile, knowing in advance how much you need to earn to cover your budget and planned expenses is invaluable.  If you regularly are hit with large, one-time expenses, having the accounting records to see a historical trend can help you budget for future expenses.

Using cash thwarts this system unless you manually enter in every transaction, what it was for, amount, paid to whom, classification, etc.  Using credit cards automatically does this for you.  You'll want to use accounting software or a service to import your transactions from all your cards and bank accounts to keep track of this for you automatically.  Writing checks is only slightly better than using cash; it's still less than ideal.  I only write checks if I have to; most bill collectors will let you pay with credit cards, though watch out, some will add a fee for doing so.

Converting to accrual accounting has never been easier with credit cards and automatic accounting software.  Don't say to yourself "well I don't make or spend very much money, I don't need to do this."  You need to start now before you start earning more money, or you'll end up spending even more.  Think about some time ago when you earned less.  You spent less because you had to.  Now you earn more and if you aren't saving, you are spending more.  The only way to get ahead is to not spend all that you earn.  You can only do that if you have visibility to where your money is going.

This is the first step to financial independence.

Friday, July 3, 2015

It's Alive!

Hi there, I'm Bryan, seasoned IT professional, investor, startup owner, landlord, life hacker, financial wiz.  I'm well on my way to early retirement; life has been good to me and I feel it's only fair to pay it forward and share what I've learned in positioning myself to live the good life.  I've also made plenty of mistakes in getting where I am now and I'd like to impart wisdom so others don't repeat them.  

I've been meaning to create this blog for at least 2 years when I came up with the idea and name (pronounced pown-ing).  The vision I have for this blog is to provide complimentary information and quick references for personal finance, taxes, small business practices, investment ideas and opportunities, career related advice, and other educational resources on how to become financially independent to retire early.

I was inspired to strive for a better life for me and my family by many great authors and bloggers. I'll be covering these authors in more detail in future posts, but for now here's my list of those who have inspired me the most:  Jim Rohn, Brian Tracy, Timothy Ferriss, Pete MMM, Steve Pavlina, Malcolm Gladwell, Napoleon Hill, and George Samuel Clason just to name a few.

This blog should serve as a jumping point for aiding in planning your short term and long term financial strategies by inspiring and educating.  I'll do my best to keep entries organized by type for quick reference.  There's an active Facebook group which is associated with this blog which serves as a general forum for discussing ideas and current events.  I look forward to engaging with you and helping you plan for the future.