Category Archives: Random thoughts – keeping you on your toes

Random thoughts – keeping you on your toes

Why bother with financial tracking?

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Continuing the financial planning theme from yesterday, I am going to focus on tracking in a little more detail.

This will lead to a discussion of financial net worth in a future blog.

Tracking

Years ago (before the dawn of personal computers) I tracked all my families income and spending manually using a financial ledger (yes a real book) which I wrote figures in (yes with a pen).

In the early nineteen-nineties I was a early adopter of quicken for windows (a so called personal financial manager – PFM).  I used it for tracking my income and expense as well as an ongoing financial net worth calculation.  It was much quicker and less messy then the ledger system, which went bye-bye.   I strongly recommend if you are not using one of these “apps”  you start right away.  As mentioned in yesterday’s post all financial planning stems from this one basic foundation – ongoing tracking.

Which Financial Tracking Tool

For getting started basically you want a product that contains functionality that lets you enter each expense and and income entry by category and by account type (e.g., checking, saving, investments, loans etc).  Most products have default categories to track spending by and you can add your own custom.

Although I am an early adopter and long time user of Quicken I have flirted with other products.  In the end though the benefits of alternate tools have not been enough to drive me to change.  However,  I would recommend a google search to find the application you are most comfortable with (there are some great free shareware products out there).

I got a tool and I am entering every transaction, so what?

The basic tracking information you are gathering in the tool has three principle uses.  (Disclaimer, this is planning 101 so I only am describing the basic uses, there is a lot of advanced stuff you can do)

  1. Report on spending by category over a specified period – You can do this review weekly, monthly, quarterly, etc.  I personally just do it annually (so it is not a lot of work and is just once a year).

    I keep all the summary output of spending by category for each year (my current spreadsheet has 25 years of data).  I can compare what the difference in category spending is year over year; year over overall average; and so on.  This lets me see trends at a glance and make decisions.  For example restaurant spending is on the rise, automobile repairs tripled year over year but are close to the average.

    These observations (which I basically make once a year) let my wife and I manage our spending behavior to match our lifestyle, rather than visa-versa.   This is not a work intensive exercise and the benefit is amazing.

    For example the rising cost of the auto maintenance category could lead to a decision to use public transit (reducing auto cost) so more money is a available for other things we prefer.

    I should note that the analysis you make should be as broad and long reaching as you can, not just a tactical year over year consideration.

  2. Income vs. Expense – I will describe this in a future post.
  3. Net Worth Calculation – I will describe this in a future post.
Random thoughts – keeping you on your toes

Does personal financial planning make sense

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For any activity I am considering engaging in, the first question I ask is about value.  Value is a measure which considers both the associated effort and benefit.

Let’s say you are planning to spend days researching the best route to drive to work.  This entails determining what the route options are, than trying them out, timing them, maybe trying and comparing them during your leisure hours.   The extra trips have a gas cost associated with them.  In the end you may find the difference in travel time and gas costs between the four routes you found is a maximum time saving of less than 5 minutes.  Also the difference in gas cost negligible and the stress in rush hour is about the same for each route.   I would classify this route planning exercise as low value, the effort to develop the plan is not justified by the benefit.

Unfortunately sometimes it’s much easier to gauge value with hindsight than foresight (just an observation at this point).

This value discussion is relevant mainly because financial planning  is usually considered by most to be high effort and hard to do (often people hire others to do it for them).  While the effort is perceived to be hard the benefits are long term and usually not immediately tangible.    This thinking often leads to the conclusion that the exercise is of lower value,  not worth doing now, maybe later.

Money and Lifestyles

Financial planning is an ongoing exercise covering a lifetime or at least to retirement.   Plans that are developed should be flexible and need to change with your circumstances,  The objective is to enable your personal lifestyle to meet your expectations.

The Price of Entry

Data!  Building a financial plan, monitoring and updating it are 100% dependent on the historical data.  First and most important answer the question, what are you spending your money on?  Spending and saving objectives are the predictive part of the plan and frankly just gazing into a crystal ball to make predictions generally does not work.

The planning exercise starts with capturing and documenting your spending patterns over a reasonable period (at least one year).

You can use this historic spending to help predict future spending.  This includes saving plans and investing returns.   Then keep tracking ongoing to see how you are mapping to your predictions.

If your predictions are not going to achieve your goals short and long term using the past spending patterns and personal lifestyle behavior analysis to determine how you can achieve what you seek.

The bottom line

In future posts I will be exploring financial planning activities in more specific detail.  Basically a simple “how-to” primer is to come.   The purpose of this post was set the basic principles plant the idea that the planning effort might well be worth it – i.e,  high value overall.

Random thoughts – keeping you on your toes

Thoughts about upcoming elections

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For me the Canadian Federal election campaign is too long.  I am used to four to six week campaigns and over two months just seems a long time.

That being said the US presidential campaign meanders on for more than 2 years so I guess two months is not that long.

The latest Canadian polls have the Conservative party edging up into the lead.  As we are now a reasonable length of time from the election (less than a month) I believe the polls are starting to be meaningful.  The past polls were showing the three main parities neck in neck and I postulate this is because so many voters were undecided.  That is starting to change.

We could still end up with a minority government in Canada after this election, however, my prediction is a solid Conservative majority and five more years of stable but unremarkable governance.

Not sure if any of the political types read my blog but for future reference if you want to excite the populous and get a good voter turnout try the American practice of adding questions to the ballot. For example what about a question like  “Should the use of marijuana be legal – yes or no?”  I have not missed voting in a federal election since I was 18 so undoubtedly I will participate in this one, that said a question like that on the ballot would get me pumped about the vote – just sayin.

What about the US Presidential Race

I predict Donald Trump (Republican) versus Hilary Clinton (Democrat) in the final race.  I admit, it is possible anything could occur in the primaries, so this is a very early prediction.  Things are shaping up that way.  I shake my head about Donald Trump but then remember the residents of Toronto elected Rob Ford so anything can happen.   I really believe citizens of the United States could get behind Donald Trump.  What an administration that would be.

 

Random thoughts – keeping you on your toes

Changing of the seasons

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Each year we experience two equinoxes and two solstices.  These four events are used to define our seasonal changes – officially that is.

Today is the autumnal or fall equinox in the northern hemisphere.  An equinox is simply the point at which the sun crosses the equator and day and night are of equal length.   In the northern hemisphere the fall equinox occurs in September (a slightly different day each year).  It’s the opposite in the southern hemisphere.

Today, September 23rd at 4:21 am the sun crossed the equator and the fall equinox began.  The fall equinox leads to the winter solstice when the night is the longest and day is the shortest (around Dec 22nd).  Again, the opposite in the southern hemisphere.   As the daylight hours reduce it gets colder, hence why the coming solstice officially kicks off the season of winter.

In Reality……..

The truth is the further north you live the earlier you start to experience the seasonal changes so although the equinox and solstice are good rules of thumb as to the seasonal changes and associated weather (brrrr!) they are not absolute.

Before I forget though, welcome to the first day of Fall 2015.  (Unless you live in the southern hemisphere than it’s the opposite.)

Of course if you live on or near the equator the seasonal changes are minimized.  It’s sort of like your weather is just one season year round.

Who figured this out and how did they do it?

Sometimes I wonder how human kind figured out the mechanics of the seasons, the cause (that is, earth orbiting the sun, earth rotating).   I only know this because I was taught in school and it makes sense,  so I believe it (and I guess Wikipedia say’s it’s true too so it must be).   It might be strange but I wonder if I was not taught about the earths obit and rotation would I have been able to figure it out.

It is actually pretty fabulous that others did all the analysis for us, does leave me wondering about my own capabilities though.

Again Happy Fall 2015 and don’t forget to bring in the tomatoes before they freeze on the vine – they won’t turn red and are not really edible after that.

 

 

Random thoughts – keeping you on your toes

Do Fire Drill’s add value?

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Throughout the years the office buildings I have worked in generally practiced regular fire drills.  Sometimes you would get an advance notice (at least the managers would) and sometimes not.  The purpose was to make sure the occupants of the building could exit in an orderly manner following an alarm.

On the surface this seems like a good practice, however,  I would like to explore the value of this practice a little further.

Whats the impact and likelihood.

The risk event  (e.g., delayed exit during a fire, building collapse, attack by a jet airplane ) certainly has the potential for a high impact.    A delay or being trampled could result in death or serious injury.  For most of these risks though there are a number of mitigating factors that reduce the risk from occurring in the first place.  Things like regular inspections of buildings for fire hazards, early warning, special engineering for earthquake impact reduction and fire suppression devices are just among a few of these mitigating processes.   As a general rule, I would argue the likelihood of the risk event resulting in the need to exit rapidly is reduced to low by the various mitigating factors employed by building owners (recognizing some more than others, but building codes require a certain minimum level of mitigation.

So based on the assessment of high impact versus low likelihood how valuable is the pre-risk event mitigation of a fire drill.  One way to view this question is to consider the effectiveness of a fire drill.

My Experiences with fire in large buildings

I have only responded to three real fire alarms in my lifetime and all occurred in buildings where I had not participated in a fire drill  (two were hotels and one was an apartment building I lived in).  In all cases the building occupants exited rapidly, orderly and without incident.  Also, I can say with confidence the majority  (like me) had never participated in a fire drill in those buildings.

Unnecessary Risk Mitigation

Considering the effort, loss of productive work time and minimal risk mitigation value I am not a fan of fire drills.  Even without a practice drill the likelihood of someone not being able to exit or a mad panic occurring which delays the ability to exit is low in my mind.  And the impact would probably be quickly resolved.

And my final point would be the places where rapid exits from a building has resulted in people being trampled or injured usually occur at events (concerts, dances, etc) and generally none of these places (where the risk event has actually occurred in the past) conduct drills.  This of course is mainly because it is not practical.

 

 

 

Random thoughts – keeping you on your toes

Tesla Electric Vehicles (EV)

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One of the largest markets for refined oil is automobile gasoline.  Electric cars will reduce that market.  I do note that some electricity is produced using oil products, so more electricity use could increase oil demand somewhat.

All in all though, it’s obvious electric cars will have a strong impact on demand for refined oil.  For me, the key question is when will  electric vehicles (EV) fully replace those based on internal combustion?  Will this occur before oil supplies are exhausted, or just around the time they are running out or will the drive to electric be linked to the depletion of oil supplies.  That is, when there is no more gas will people flock to EV’s.  Or, will people flock to EV’s before gas supplies are an issue.

Of course, planes, ships, trains, power plants and a number of other things use gas so even if automobiles completely switch to electricity there will continue to be a demand for fossil fuels (just very reduced).

Overtime replacements for these other uses of oil will appear (e.g., methods to produce heat and power through renewable energy sources are already being promoted as replacements for fossil fuels)

Is past behavior a predictor of the future?

The opportunity to switch from internal combustion automobiles to electric vehicles has both existed and been practical and viable since the nineteen seventies.  Yet, on the whole, the populations of the earth have chosen not to switch.  This behavior predicts that switching will neither be fast nor occur without some strong motivation (e.g., no more oil or refined oil products are no longer affordable).

Ecology or Supply

It is quite interesting that the fact that using fossil fuels is proven to damage our environments has not caused us to stop using them.   I postulate one of the key reasons for this is immediate impact.  The reality is the boiling frog analogy is quite accurate.   In this example,  if you put a frog in a pot of water and start to boil it, the frog will remain in boiling water until it is unable to escape.  When  the danger is realized, it is too late.

In the case of the human race, the capability to adapt and recover (human resiliency) has been proven throughout the past centuries to be very real.   That is, a flood or earthquake or volcanic eruption are taken in stride, the populations react, recover and move on.   Will this be true for the overall ecology of the planet remains to be seen.  I will probably be dead before then and so it’s hard to get motivated.

The Economic Dilema

I will close this post with the other key factor around the switch to electric vehicles.  Much of our current economies (world wide) are dependent on acquisition and refining of fossil fuels and building and maintaining of internal combustion vehicles.   Can we switch to electric vehicles without a massive economic turmoil?

Random thoughts – keeping you on your toes

Politically correct speak

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In 1949 a fictional novel by George Orwell was published.  It was called “1984”.   The story presented the world as George perceived it might be in the year nineteen eighty-four based on his observations of the current state of things.

His vision of a world populated by totalitarian states which were presented to the populous as utopia’s was frequently used during the decade’s of the fifties, sixties and seventies as a warning of what was to come.

While the totalitarian states predicted in the novel did to not come to pass the use of language as propaganda throughout the tale always fascinated me.   That is not necessarily what you meant but how you said it.  This is a practice that continues today, that is how we label things somehow changes the meaning and  makes them more acceptable.

What’s in a label?

Recently I called a para-medic an ambulance driver and quickly learned how inaccurate this was.  The lady in question told a tale of how she had been called to an accident where one of the police officer’s on the scene was holding a witness for her care before questioning them.   The officer introduced her “The ambulance driver will check you out now”.   She followed that with “And when I am finished the police car driver will have some questions for you”.

For me this is a humorous  tale with a purpose.  The reality is para-medic does describe the role far more accurately than ambulance driver which was the traditional title as I was growing up.  The work performed by these first responders (an alternate and as I understand it, acceptable title) has changed drastically since my youth, both their capabilities, skills and success ratio’s.

Semantics Matter!

I have always been fascinated by importance of meaning behind the words and how the meanings morph over time.  For example the term “gay” to describe homosexuals has gathered negative connotations to the extent I have recently seen commercials on television deriding it’s use.   Originally intended to describe a particular sexual orientation, a negativism was associated with the word because the practice was viewed as deviant.  Being a homosexual is now largely an accepted practice by society.  Today, to describe that sexual behavior in politically correct terms using homosexual is much safer although in fact the two words do generally refer to the same things (albeit one does have a negative spin).

Should semantics matter?

Language is how we communicate.  The need to assign nuances to our words is paramount, so short answer – Yes semantics matter and in my opinion this needs to be the way it is, so societies can continue to mature  communication practices and grow clarity when exchanging information.

Random thoughts – keeping you on your toes

What happened to TV?

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My family bought their first television in 1963.  It was black and white.  The broadcast signal was captured by “rabbit ear” antennae.  Before the purchase, our home entertainment was transmitted via radio (and so limited to sound).

Today feeds from the internet, satellite and cable provide the path for digital entertainment to make it’s way into our home.  Back in 1963 the picture was transmitted via an analog signal (this is basically  sound waves with picture information, that is electron’s moving in a wave like pattern through the air.)

Over the years competition in transmission of video signals intensified from a few channel (in 1963 we received basically two) to the large number that exist today – we can receive hundreds if desired.

The business model for the service has totally morphed as well.  Originally TV was totally free to the consumer supported by paid commercials. then cable service was introduced enabling more channels from farther away (for a cost) up to today where many different business models are practices.  That is, from free to pay on demand to pay services , etc.

The addition of downloading and streaming digital video via the internet increased the access to movies, home videos (e.g., you-tube) and a plethora of options for searching and viewing media.

Commonplace Way’s to Access Media Entertainment

Just as an example I list  all of the ways I can access digital media from my home.  I offer this as an example recognizing I might be a bit atypical with the number of options I have.  Still it shows the wide variety of options available and even my hardware probably just touches the surface of what is available.

Viewing Sources

  • HD TV
  • Digital TV
  • Media Projecter (can display video on a movie size screen or wall

Signal Options (can provide signal to all of the above wired or wireless)

– digital cable (both standard and high definition

-Apple TV – download and stream digital media via an internet connection

-PS3 (Playstation) – download and stream digital media via an internet connection

-Rasberry Pi (fully functional linux based desktop computer that retails for $40) – runs XBMC software which recently renamed Kodi, which searches and streams movie, tv, video, and audio from online sources

-Boxi Box –  media hardware which searches and streams from online sources (you can jail break the proprietary software and install Kodi)

-NLSU2 (jailbroken running linux O/S)- basically a twonky media server which which can stream from any digital collection on a source hard drive.

-Chrome Cast –  connects and streams from mobile devices like android tablets, I-pads/pods, phones, etc.

-Desktop Computers (Mac, Windows, Linux) – streaming from the proprietary stores (Microsoft, Apple, even Raspberry Pi has one) or just using a bit torrent software to download media.

Although an extremely popular source I do not have Netflix or any of the emerging online services like it (e.g Shomi), don’t really need them.

And the point

Today’s post is just a random musing about the dramatic changes in home entertainment I have seen in my so far short lifetime, what’s next, I wonder?

 

Random thoughts – keeping you on your toes

Aging Gracefully

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“I look forward to being older when what you look like becomes less and less an issue and what you are is the point”  – Susan Saradon

At a lunch party I attended last week one of the guests was eighty-nine years old.   The fascinating part of the story is she was the life of the party.   Both extremely witty and sharp, the conversation was not a reflection on the past (although her stories were part of it) but a focus on the present and the future.  Occasionally I meet people who are fully present and in the moment continuously, and this gracefully and funny guest was all of that an more.

It made me wonder, even hope, I would be that spry and alive at eighty-nine.   It’s only a small thing but her car’s license plates were personalized, I can only hope to still be driving at eighty-nine.   For me this was a fabulous example of someone living life to it’s fullest.

Love of Live?

My Aunt Betty lived over ninety years and demonstrated a strong thirst and love for live the whole time.   During lunch I had a kind of an epiphany (not literally).  It seemed obvious to me one of the keys to longevity was an appreciation of all the great opportunities life offers.    Basically having strong motivation to live each day to it’s fullest can contribute to both health and presence of mind.

Retire and Die

Over the years I have read numerous long term studies on the effects of retirements.  There is a wealth of statistical documentation that those that retire from a life time of daily work with no plans or replacement personal goals and objectives die shortly after retiring (1 to 5 years).

Is there a magic formula?

Having a reason to live, a thirst for enjoyment (from reading a book to parachuting from a plane, whatever turns your crank) are the keys.   You body might betray you from a physical perspective but remember your life is about who you are, not how far you can run, your complexion or the size of your breasts.

Unfortunately the bad news for those that read my posts is I plan to live a long time and these strange musings will keep on coming.

 

Random thoughts – keeping you on your toes

Do organization structures matter?

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After an almost 40 year career at various Corporate, Crown Corporation and Public Institutions I have come to the conclusion that organization structures really matter and fact can be the difference between high quality outputs (product, service) provided efficiently (time frames and cost).

A Model to Consider

Years ago I worked with an organizational psychologist.  I was fortunate to be exposed to his theories about companies structures.  There are many of these theories, however, those of Elliot Jaques really resonated with me.

Organizations consist of layers of complexity.  Let’s call these strata and number them.  The lowest number the most simple and the highest most complex.  So S1 (strata 1) is junior and say S5 would be much more senior.

In order to keep the model simple and effective we determine which strata of the organization you reside in, based on the time it takes to do your longest task and the complexity associated with that task.  Complexity ranges from do this/do that to do this, consider that, if this happens then possibly that etc.  Basically complexity is related to the information tree associated with making a decision and completing the task.

How about and Example

Take a bank.  A teller’s longest task is weekly balancing.  The decision tree is simple, count this cash, make a deposit.  Check the end of day balance and confirm it is correct.  Fairly straight forward.  So this role would be a S1.

The head teller’s longest task is scheduling the tellers over a month and the decision complexity a little higher.  What will the line up be at noon, should I schedule more tellers, if the commercial customers come in a ten in the morning I should have three tellers on duty but what if they come in at eleven. This role could be a S2.

You can following this process up the strata’s from supervisor to manager to director, vice-president, senior vice president, etc.  Regardless of the specific title the actual work can be mapped to an applicable level.

Note:  This model is not predicated on titles (although I have referenced those above, the key to this model is to determine each strata based on the work being completed by the role (longest job and complexity), not the title.

Using the model to improve organization structure.

Like the basic definition of the model using it to improve quality of organizational output and overall efficiency is very simple.

  • When people at the same level report to each other you get compression.  That is someone whose work fits the S3 criteria reporting to someone else whose work also fits the S3 criteria.  Typically these two individuals will both be frustrated, not feeling comfortable in their roles and this effects their work.
  • When a person at one level reports to another 2 levels or higher you get a gap (i.e, an S1 reporting to an S3)  This gap results in a deficiency in the level of support the lower level role is receiving and work quality is impacted negatively.

The fix is to identify gaps and compression within your organization structure by reviewing the work done by each role (e.g., tellers, head tellers, customer service representatives, assistant managers, deposit analysts and so on for whatever roles exist in the Corporate or Institutional area).

Then simply validate the reporting relationships and re-organize to eliminated any gaps or compression identified (i.e., add or eliminate roles and reporting lines as needed).

Voila, your organizations performance will improve within six months.