Kirby on Finance

What is your Financial DNA?

In a conference call earlier today, Steve Jobs said, “What we want to do is deliver an increasing level of value to these customers, but there are some customers which we choose not to serve. We don’t know how to make a $500 computer that’s not a piece of junk; our DNA will not let us do that. We’ve seen great success by focusing on certain segments of the market and not trying to be everything to everybody, and you can expect us to stick with that winning strategy.”

I have always admired Steve Jobs. Not just because I use and love Mac’s but because he has an ability to seize the moment, grab our attention and inspire us to not only believe in what he’s doing at Apple, but what we can do for ourselves through the products he creates. As I kept thinking about that quote, I realized there’s a little something there for all of us – particularly with respect to our personal finances.

Think about what Steve Jobs said above, making inferior computers in order to reach a low price-point isn’t in Apple’s DNA. Essentially, the grounding principles of Apple won’t let them risk the trust of their customers by compromising their standards.

I’m sure you’ve heard of the Human Genome Project. Essentially, the project has mapped out the human genome by literally decoding our DNA in such a way that each of us are now able to have our personal genome decoded. This process will literally revolutionize the way doctor’s treat their patients, allowing them to predict what diseases or conditions the patient will ultimately develop and treat them before they even occur.

Just as Apple’s DNA won’t let it produce cheap computers at the risk of an inferior product, our own DNA has imbedded with it certain characteristics that increase or decrease the likelihood of some health related problem down the road.

All of this begs the question, what is your financial DNA? Does your financial DNA dictate that you won’t use credit cards because of the inherent risks they pose on your spending habits? Conversely, does your financial DNA show signs of potential spending problems down the road and warrant the need to “treat” the problem early and the need to develop ways to live more frugally?

It’s a shame we can’t send our financial DNA to a specialist and have them decode it for us like they can our actual DNA. However, with an honest look at the way we handle our finances, we can get awfully close.

Have we lost our ability to think critically?

I love reading articles that make a case for doing something completely opposite of what you’d expect. It’s not that I’m a contrarian at heart (though some say I am), it’s because I think when you’re presented with options, you’ll behoove yourself to truly know the advantages and disadvantages of each. I also think that when given a clear cut choice that’s best for you, you gain a better understanding and are more likely to stick with it if you fully understand the choice you’ve made.

That’s what I had in mind when I wrote:

Are you saving too much?

Does giving to charity hurt your bottom line?

From reading books and blogs dealing with finance, I see a lot of ideas thrown out there with very little critical analysis behind them. That’s not to say that the advice given isn’t correct, because a lot of it is. But you have to wonder how much of the information we receive relating to pretty much anything is just a large collection of group think. How many articles do you see that quote to another article? Almost every single one! Then you go to the original article and end up finding that a lot of the analysis in it is pretty weak.

I’ll be honest with you, I’m guilty of it too. It’s really easy to piggyback on the writing of another and produce a quick and thoughtful post. I’m sure I’ll still do it sometimes, but with this blog I really want to try and break through a little bit and present other sides of arguments that other writers, pundits, and bloggers have put out there. I think one of the important skills we’re losing in our society is that of critical thinking. We depend so much on other telling us what to do that we’ve lost the ability to do it ourselves. So, my goal is to make Kirby on Finance a bit more critical, not really in a viscous way, but in a way that will hopefully promote thought and conversation. I hope you’ll continue to visit, come back often, and if I light a little fire up under you, you’ll become a bit more critical yourself!

Is Your Own Ego Your Worst Enemy?

Yesterday I wrote about the pitfalls of emotional investing. I view emotional investing as the psychological consequence of our own weaknesses having exposing themselves. Emotional spending and investing are created by our own perceived weaknesses, but just as a perceived weakness can cause us to handle our money poorly, so can an unreasonable perceived strength - an ego.

I’ve been guilty of it myself - a couple solid stock trades and I think I’m the next Jim Cramer. Shoot, I’ve been known to feel a little bit like David Bach after I have a good month with staying on budget. This isn’t to say that being successful isn’t worth patting yourself on the back, because a little self-congratulating is always helpful when you’ve put a lot of work into something.

The problem is that when a little self-congratulation takes the form of an ego, we tend to make careless errors on a much bigger scale than we would have before we picked up an ego. If it’s dealing with finances, we may decided that we can make a bigger ticket item purchase because we can “budget” it into making sense. If we’re dealing with investing, we may decide to get after an even more speculative stock because we’ve “gotten good” and finding the needles in the proverbial investing haystack.

The trick is to stay grounded. This means being accountable with yourself at all times. I’ve found the best way to stay grounded after any form of success is to give myself a fair assessment of what I did right, but always find areas to improve. I know this sounds like a real bummer, but if you can let yourself enjoy success but never be satisfied with it, you’ll set yourself up for even greater victories in the future. Of course you can take the time to smell the roses, but think about it - successful people in vastly different areas are never satisfied with the successes they have, they just don’t let it go to their head. Think about Tiger Woods, he keeps winning, breaking records, but he also keeps finding areas to improve. It’s really no surprise that he’s consistently at the top of his game is it?

How to keep your New Year’s Resolution!

Well all know the drill very well by now – we make New Year’s resolutions and then a few weeks (maybe days) later we drop them.  Blogger Alex Kharlamov offers up a few strategies to help us actually follow through with our New Year’s resolutions.  My favorite is adding actions to goals:

Without following through, NYR’s are just empty words. You must put in effort to see results. You must come up with a concrete plan of action for every NYR on your list. If you write your NYG as something vague like “lose weight”, you’re not going to be too motivated to follow through. What exactly is it that you’re supposed to do? Sit and wait until the weight is lost? Keep on running a-la Forrest Gump, until the desired weight is reached? And since your sub consciousness hasn’t received a direct order, it’s going to stuff that ‘lose weight’ comment to the back of your brain.

How to make and keep New Year’s Resolutions [Documenting Success]