frugal2free

Occam's Razor at the movies

Occam's Razor ( often summarized as "the simplest explanation is usually the right one") isn't just good advice for science.  It applies to frugality too. Looking for the simplest way (best value) to fulfill your financial values creates great financial success.

Example 1:

You want to see a movie for date night.  What is the simplest way to get your goal?

A. Full price new release movie  $15.78  per couple.

B. Netflix/Amazon Prime $6$ total.

C. Dollar movie theatre for $2-4 per couple. 

D. Redbox $1 per couple. 

E. Movie from library $0.

Of course if you value privacy you may choose a on demand stay-at-home option or perhaps Redbox.

If you value novelty you could choose the full price new release option. 

And someone looking for the cheapest way to be entertained would pick a movie from the library. 

Any option is fine, but knowing your values simplifies your decisions.

Example 2:

Your vehicle  won't start.  So you could..

     buy a new car

               replace the engine

                      replace the starter

                             replace the fuel pump

                                    replace the battery

                                          charge the battery

                                                     or  add fuel.

Which one is simple? Which one saves the most money? Which one usually is the culprit for a broken down car? 

Occam had it right.  Look for the simplest way ( lowest money and time) to get your values and you will be much happier.

 

 

 

"Price is what you pay. Value is what you get"

Recently I compared costs for a website design  and consequently rediscovered the wisdom of  a Warren Buffett  quote , "Price is what you pay. Value is what you get."  Below are the five cost estimates I received for website design.

1. $799

2. $299

3. $2,000

4. $8,000

5. $18,000-20,000

 

Each website designer told me various reasons for their pricing. Ironically the ones with the highest price said they charged so much because their custom design would allow for nuances in color.

  Color? What kind of color costs an extra few thousand dollars?

Incredibly all of the site designers with costs over $799 told me they would not host the site nor update it.  So I get to have a really cool color and I get to maintain my own site if I simply pay you 10-100x what a local company will charge?

This wide price fluctuation is true for more than just website design.  A friend of mine was quoted $500 to fix a gap in a door jam. Instead she fixed it herself with some putty and a 2 x 4.  Total cost? About $3.

It's okay to pay a little more for something with great value to it. But does what your buying offer greater value to your life or does it just cost more money?  Remember what Ben Franklin said, "A fool and his money are soon parted." We are foolish when we pay big money and get little in return. Get value with whatever price you choose.

 

Yin and Yang

Image via Wikipedia

"Yin yang are not opposing forces (dualities), but complementary opposites that interact within a greater whole, as part of a dynamic system."

Many times it's tempting to think challenges can be solved solely with rational facts and figures. This tough analytical approach is like what the Chinese call  Yang.  "I can convince this person by debate or with numbers." or "If I just cut expenses I will be well off financially."

Yin is the Chinese name for the softer more emotional, dreamy side of life. "If I listen to my inner voice or to another person perhaps I will learn something new." or "It would be nice to visit Europe someday."

In our world emotions and dreams are often discounted and even scorned.  Throughout history  impact leaders have relied on emotion and reason (think Mother Teresa or Gandhi). They combined wisdom (Gandhi had a law degree and Mother Teresa studied nursing and English)  with emotional dreams (march to the sea or Calcutta slums) to create lasting love and change. What if yin and yang, emotions and reason worked together in your financial life?

For instance, consider the planning and budgeting and economizing (reason/ yang) you would do if  you knew you could watch your favorite basketball/ baseball/ football team front row (emotion/ yin)?  And what great economizing and earning could a couple do if they had a very emotional goal to visit Hawaii or the Caribbean?

 Your family finances will improve miraculously when the concept of yin (emotional dreams) is used to fuel yang (planning, saving, researching).

Lessons from the Titanic

In April of 1912 over 2,000 people boarded the magnificent Titanic.  The story of its sinking is legendary and its great loss of life  is usually attributed to icy waters and  a meager supply of lifeboats. But icy waters and a low number of lifeboats were only attributes of the demise  not the crux. The main reasons for the demise of the Titanic were poor communication and poor vision.

For instance another ship, The Californian, was only 20 miles away.  Why didn't it help? Because of many Communication problems.

The Titanic's Marconi system was shut down on Saturday and part of Sunday before the Sunday night collision. With the communications system shut multiple ice berg alerts were not received or simply ignored.  And the operators on the Titanic told the Californian  to "shut up."  Then in strange irony the Californian shut down their Marconi system 3o minutes before the Titanic began sending distress signals.  In our families we sometimes fail  to talk about money or we ignore sound financial advice to our own demise.

Of course communication wasn't the only challenge with the Titanic.  Vision played a role too. The weather was clear and devoid of fog.  A look out could have spotted the ice berg in time to slow down (22 knots) or change direction. Instead the only pair of  binoculars were locked away and no body on the ship had a key.  Sometimes we get so blinded by our daily debts and forget to plan long term investments and spending. We need to take our "binoculars" out and plan what we will do with money so we avoid the big icebergs in our future.

Other ships missed ice bergs in that same region, but communication and vision were crucial in the Titanic's demise.

Communicate with those that control money in your house. Establish a clear financial vision by proactively creating a budget.  Communicate and envision what needs to be changed now so you can avoid financial calamity when the big ice bergs appear. 

Wants and the Asymptote

Food, water, clothing, and shelter are finite needs.    Wants are oftentimes how we satisfy our needs. So we want 3 newer cars, but we could take public transportation or car pool.  We buy a 3,000  square foot home, but really could do with an apartment.  Wants embellish needs and are infinite. Thus 3 newer cars becomes a desire for 4, a big house leads to a desire for a bigger house and on and on. 

Remember wants are like an asymptote. 

At first wants provide happiness but we can never get enough.  And as we acquire more wants,  our satisfaction decreases and agitation increases.   Some confuse wants with needs and forget that needs are finite.  Remember less is more once our basic needs have been met. The more surplus wants or luxuries we pursue the less joy we experience. If we are less greedy with our wants,we can help more needy.

Inflection Points

One of the best ways to have an abundant financial life

is to master inflection points.  Financial Inflection points

are actions/ results that cause a change in wealth or income. 

Inflection points are key to momentum. 

And momentum is a wonderful  ally in building financial abundance. 

Examples of monetary inflection points are:  studying a book on money,

attending a finance course,   paying off a debt,

creating a workable budget (replete with a few luxuries and doodads).

These  changes in direction can lead to many small and large changes

which cumulatively create  massive momentum.

 

 

If your career ain't broke? Innovate

When is the best time to look for a new career?

Before you need to look for a new career. If you are doing well at your job or not

you should improve incrementally until you become excellent.

Then set yourself up for a quantum leap of innovation.

Reinvent or innovate yourself.

Why? Because the economy, your boss or something else could replace you.

You will have  much greater earnings and less time looking for a career if you innovate

before you need to. Innovate by getting more training, reading books,

studying your career options, and even interviewing often.

When should you get additonal training or education?

Before you need to.

The lizard brain says our current career is "good enough."

And, "If it ain't broke don't fix it."  Or "Just keep getting a little better."

More money and peace are often dependant on creativity, education,

searching, and networking.

Why not make a quantum improvement before you are forced to?

 

 

What price tags ignore

A price tag will only let you know how much to pay today.

But it will not tell you the total cost to maintain or replace.

In other words does the product require more maintenance than a similar, easier to

maintain product?

Will it cease to work properly well before a similar brand would?

Additionally is that price wholesale? Retail? New? Used?

How long will the product last? Will it do what you expect?

Do you need to have it? Is it a want?  A luxury?

Will you still want it tomorrow? In a year?

Could you pay more for another product with longer durability?

Could you pay less for another older, better quality product?

Value implies the best durability and use for the best price.

Examples:

Steel case , Jet blue , and Nike have higher price tags than many of their competitors. 

Why do they thrive in the marketplace? Value.  

Value. It's what the marketers can't put on a price tag, but you should. 

365 days and 24 interviews

365  days is the time a friend invested  researching his new career.

24 exploratory interviews with people in his new line of work.

And countless questions to anyone with knowledge.

The result? His income tripled.

Time is money if time is not idled away.

Time well spent in research can yield huge income.

This holds true for careers or just about anything else.

After the honeymoon

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marriage is an event.  Staying happily married is a process. 

Childbirth is an event.  Parenting successfully is a process.

 John C. Maxwell was right.

We over estimate the event and under estimate the process.

Events are usually celebrated, but success comes from the process after the event.

The elements of process?  Study, patience, work, and discipline.

Why is it easy to treat money like an event (inheritance, gambling, & payday loans)?

What would happen if you continuously studied finance books?

What would happen if you continuously increased your earning power?

As we treat money like a process (life-long study and work), we will be happier.

 

 

(Photo Courtesy Sharron Goodyear)