June 27, 2015

Living Off Savings

Have you ever been laid off or your spouse loss their job? It’s often not their or your fault, but the business cycle changed or the economy in recession. Worked for one company with only one customer. When the US Navy did not need two suppliers, we were out of business. We feel bad because we did not see it coming.

Working in several industries have been through this cycle and expect to experience it again. My joke with younger workers is there are two types of aerospace employees, those who have been laid off (point to me) and those who will (point to them). Entrepreneurs may have their income go to zero with no warning.

What do you do when you have lost your job? Panic? Get Mad? Usually am in shock, and crawl in bed for a week. Had a co-worker who brought his clubs and played a round of golf every time happened to him.

There are some things you should do when jobs and income disappear:
  1. Breathe. Some deep breaths will help you relax and start to think.
  2. Exercise and take long walks. Humans think better when we move.
  3. Start making a list of all your successes. Not in our nature to compliment ourselves, but these case studies are going to help us get to work.
  4. Cut Spending Now! You need internet (unless you have a kind neighbor), and you don’t need premium cable or Netflix subscriptions. Take in a roommate or rent a room. You want to stretch unemployment and savings as far as you can.
  5. What do you have you can sell? I sold a house because I could not afford the mortgage. Got an extra car? Collectables? If you have to move can you get rid of it now?
  6. Take a taxi job to help you get to your next job. Work temporary, bartend, wait tables, serve coffee, clean houses, consult, drive for Uber, or do telemarketing. No this job does not belong on your resume, but doing anything will help your confidence and recovery. It extends your unemployment benefits, you with people, make a little spending money, and recover your balance.
  7. Research your industry and any related industries. Who is hiring and why? What are the future trends? What new technologies are coming? Reading the last 6 months of industry magazines & newsletters will have you ahead of the hiring managers and create small talk topics to talk about in the interview.
  8. Set a maximum amount of time to apply for jobs. After 6 hours would start to lose my mind.

The goal of these ideas are to lower your stress, get a little fitter, and keep your ability to network and interview. Unemployment destroys your social support and routine. Be the relaxed, confident job applicant with a tan who is ready to get back to work at the interview. You will get back to work sooner.

June 20, 2015

Savings and Emergency Funds

Your future is hard to imagine. Mine did not unfold the way I thought. Imagined growing up in my hometown and working for one company during my career. After college my hometown was in a local recession and few jobs to be had. Wound up working my first job 300 miles away.  Currently working across the country in my 7th state.
Man plans, God laughs.
You do not know how well your industry or your company will do over the next 50 years. Layoffs, horrible bosses, and business closings are real possibilities.
No one can predict their health, accidents, children, nor which natural disasters you will face. So what can you do?
Saving is a cornerstone of wealth. If you don’t have money to invest, you can’t earn more except by working more hours or jobs.
Savings give you options if something happens. You can choose investments, education, nicer vacations, good homes, and better schools for your children. If conditions are going down or crime is rising where you live, you can choose to move to a safer place. You can donate to charities doing good work. Savings are a form of freedom.
Started my current job after being out of work for most of one and a half years. My savings were not very much after being self-employed for six years. Had about $15,000 in savings, an old $3,000 car and no debt.
Five years later have $60,000 in the bank, $85,000 grand in my 401k, and own a house with $100,000 in equity. How did we do it? We did not win the lottery.
Pay Yourself First
Save at least the matching 401k funds your company offers from the start. Do not give up free money and with the tax deduction this will only take a small amount from your take home pay. To get to the maximum am now putting in the 401k I increased my contribution with every raise. You don’t miss the extra money if you don’t see.
Set up a separate credit union savings account for my emergency fund. That $3,000 car could break any time and will not run forever. Put more than a car payment every paycheck in this fund to create an emergency fund. The good news is have over one year's expenses and will pay cash for my next car.
Live Within Your Means
Know how much my monthly expenses are and pay them. Pay my credit card bill in full every month.
The rent was not late nor is the mortgage. Actually refinanced a 30-year mortgage to a 15-year mortgage at a lower rate and pay extra principle every month.
We keep monthly expenses low, don’t eat out every weekend and pick affordable restaurants we like. Don’t have all the movie channels, nor the fastest Internet. (Okay added the sports channels because can afford them)
We plan our big purchases and don’t impulse spend. My wife is a tremendous negotiator and will walk away if the price is not right. My last cell phone physically wore out being 7-8 years old. The smart phone has the lowest monthly payments and was paid for by overtime.
Choose Where You Spend
Got prequalified for a mortgage and was surprised how much could borrow. Did I look for a house in that range? No, my wife and I do not need a big house for two. Looked at neighborhoods that fit my commuting, good schools and safe/low crime rates. Aimed for the median price range 40% below what could borrow. (No one says you have to be in debt your whole life) Looked at almost 100 houses before buying a short sale, waiting 6 months to close. Have the smallest house in a very nice neighborhood, cleaned up the dirtiest house and painted. Now just paying off the mortgage.
Yes still driving the $3,000 car. My wife has a good car and mine goes to work to sit outside all day. How nice of a car do I need for 8 miles? It is mechanically sound, maintained and the interior is falling apart. Including repairs have spent ~$1,200 per year.
Have a good paying career, but am in a boom and bust industry. Median price houses sell faster than the expensive houses. Not having debt lets me go where the work is.
My investments are diversified, low cost and fairly conservative. When someone promises high returns they are likely taking high risks or lying. (See Bernie Madoff)
Have good health, auto, homeowners, and long term care insurance. In addition funding a small annuity to afford retirement with Social Security. Will not have to touch the savings for many years.
Being responsible you may not be the wild friend with the fancy home, latest gadgets and crazy expenses. You will not be the homeless person either by learning how to save and invest. Being able to help others is a blessing you won’t forget either. Life is good.

June 13, 2015

How to Build Wealth

Been studying business, successful people and failures for years. It is an interesting and enlightening hobby. Frankly have learned a lot that schools never teach you. A large part of my life is unlearning what I was taught. Let me share one insight today.

First step if you really want to be wealthy. READ. A lot.

Bill Gates of Microsoft and The Bill and Melinda Gates Foundation has put out a couple list of books to read. Bill curated these list for us. He may have read 50 to 200 books this year to recommend 5 - 10 books for us.

Warren Buffet and Charlie Munger of Berkshire Hathaway have created fortunes by buying and investing in well-run businesses. It is not as easy as it looks.

So how do Warren and Charlie spend their days? They read about 5 - 6 hours per day at the office. Charlie’s children joke he is a book with legs. Warren says it is good they work in different states because they would be talking all day about what they read.

Elon Musk has started several successful businesses Pay Pal, Tesla, SpaceX among others. He is the real life example for the Tony Stark character in the movie Iron Man. “You don’t know what you don’t know. You realize there are all these things out there.” Musk says.

The average Fortune 500 CEO reads about 50 books a year. Rick Warren often reads one book a day. There is usually a reason successful people have a common habits.

“The basic law of wealth creation: principle of asymmetric knowledge – that is, any situation when somebody in a market knows something that nobody else in the market knows, and then has the courage to act on that knowledge.”
- Dr. Jules Goddard

If you want to create wealth, learn by reading. Then take action.

May 25, 2015

In Honor of Veterans

Woke up this morning thinking of my late Uncle John and the calm character this Korean Veteran had with his little sister’s kids. He kept living with mom in his house, even after marrying the love of his life. He grew two good kids of his own, was a leader in the state insurance department, affected by trench foot & circulation issues in his feet. Uncle John was a beacon of calm in a family that often did not have it.
My late great uncle Bob who I barely remember was a Green Beret.
Uncle Bill married into the family was a Navy man in the Pacific for WW2. He lived to 88, outlived 2 wives, and refused to buy Japanese cars or products. Just enjoyed spending time with him when visiting my family in Florida.
My first job was with several veterans of the Seabee’s (We Build. We Fight) WW2 vets Charlie, Phil, Stan, and many others in the large office of 100. Their kindness with fresh out of college kids, working hard, telling jokes, and occasionally singing the Seabee’s anthem for no reason at all. They are part of the reason I never feared growing old.
At worked with Stan who was a German prisoner of WW2. Mistreated, tortured and starved. Stan came back and his military doctor told him not to hold it in. So instead Stan told everyone the truth and even shared it with school presentations. He always had a smile and truly enjoy life, family and work.
At my age have a lot of Vietnam veteran co-workers and friends over the years. Remember the stories Tom told being an aircraft mechanic. His friends being tunnel rats or taking small boats up the river to bring the fight. Tom was most proud of his kids.
Thinking about the men and women vets have worked with it is not their discipline that stands out. Not their contributions to work. It is the humanity, caring, charity, faith and their confidence if something went wrong, they had been through worse, and had faith all would thrive.
The greatness of this country came from ordinary people who were willing to do the extraordinary, and then come home to raise families, work hard, and enjoy life. They are also the reason I mentor others and believe things will always get better.

May 16, 2015

The Liar’s Club: Concealing Rework in Concurrent Development

MIT posted this interesting article about the issue of hidden rework in the development cycle. Your project can crash with surprise delays that destroy delivering on time, much less on budget.

Firms seeking competitive advantage to increase market share, profit, and growth have turned to concurrent development to speed the introduction of new products and beat their competitors to market. However like any other improvement process there are weakness and difficulties. Human nature does not want to be the bearer of bad news, and the managerial attention does not always help resolve the issue.

The F-35 is an example of concurrent development. While it looks like the development is now progressing well, the program looks like a money pit. The idea was instead of doing all the development on test planes, they could start production while still testing and writing the software necessary. Several years into the program design changes are still being made which require existing models to be changed, and the software is years behind schedule. The software on this program is critical to be able to use all the technology and weapons available.

The cost of the F-35 was getting close to breaking the Air Force budget before recently turning the program around. Some critic wondered if the day would ever come. (Don’t ask my thoughts on building one airplane to fill the needs of 3+ airplanes though) 

Did work with a smaller company that successfully implemented concurrent engineering in their development cycle. Why did it work? Reality was included with the plan, and being flexible enough to realize meeting schedule with an inferior product was worse than redesigning the product again.

On our first project we were working on the development schedule. The initial proposal was the standard design, prototype, testing, order machines & tooling, then start production. I asked, “Has any design worked the first time after testing?” The answer was no one could remember that happening. We need to plan for at least one redesign after testing and have a contingency plan for a second redesign. Including normal contingencies with average lead times in standard planning processes made the concurrent engineering process work. We used it both for new product development and product line extensions.

Back to fudging and hiding rework during development. This is a dangerous practice that can come back to hurt the team and the company. The natural tendency this setback is a small problem, and management does not need to know. What you don’t realize is your sponsor and other leaders may have more resources available that can speed up the redesigning and keep your project on schedule. Second the later a problem comes to the surface, the bigger the consequences for everyone involved.

Worked for a company that taught about Malpractice and the dangers to your career and the business. They made a video and repeated it yearly. Such danger for fudging, and little reward for doing it. We had one customer, the US Navy, and could have lost the business without their trust.

Leadership is doing the real work of getting things out of the way of your teams so your people succeed. Leaders have to make sure teams know they have your support to be comfortable to innovate. Besides only about 40% of software development project complete all features, on time, and within budget. Projects failing should not be a crisis but a normal situation to be handled calmly.

The quote jumped out at me ‘‘... don’t tell someone you have a problem unless you have the solution. You’re supposed to solve it—and then tell them.’’ This thought limits the chance to get more suggestions, ideas and develop more alternatives.

Found it helped if I showed up with the bad news, with some suggestions of my own or my teams, and was prepared for getting feedback & suggestions. More productive engagement came from being prepared and open. Make sure you are ready to deliver bad news and have leaders engaged when necessary.

May 2, 2015

Be a Real _____

My friend Kelly Meloy wrote an interesting and thoughtful piece asking, “Are you a REAL (fill in the blank)?” Thought he made a great point -  doers do their craft. Don’t hold yourself back.

You should go ahead and read Kelly’s piece below first.

I disagreed with him a little over his final line, “if you get paid…” then you are REAL professional. Getting paid is NOT the right judge if you are an artist, athlete or a professional.

Have not made a lot of money from writing books, but the quality of my work is professional. My writing skills are used on my paid profession. Are you any less of a professional if you give away work to a charity? The time and materials are still tax deductible.

It is the quality and effort you put into your work that makes you a professional. The pay and/or rewards come later. Rewards are not always cash.

To be one, get started now. Act like you are already the real craftsman or artist you desire to be. Be the artist or athlete. Fake it until you make it. It won’t be announced when the day comes. Later realize you already crossed the line by being one first.

By Kelly Meloy

Are you a REAL (fill in the blank)?

REAL Artists make art
REAL Cartoonists cartoon
REAL Photographers direct and capture Images
REAL Writers write
REAL Hikers hike
REAL Skaters skate
REAL Sculptors sculpt
REAL Musicians play music
REAL Composers compose
REAL Singers sing

If you get paid then you’re a professional REAL (fill in the blank).