It’s time to talk about scams.
I am always shocked when I see the numerous internet scams out there.
I am not talking about the obvious ones like “YOU WON THE LOTTERY!” or “I AM A NIGERIAN PRINCE AND NEED YOUR HELP FOR A FUND TRANSFER”.
I am talking about the sneaky ones. The ones you ask yourself about: “What if it really works ?”
We always think that we are too smart to be fooled by these scams and that it could never happen to us or any of our friends. Ok, maybe it could happen to this one friend we have. Yeah, you know which one…
Unfortunately, it is not just about other people. Internet scams are a big industry: worth more than 13 billions of dollars according to last year's statistics ! And it doesn’t look like it will stop anytime soon.
Almost all these scams have similar pattern which makes it possible to spot them early. If you are careful and if you use your critical thinking...
I will not cover internet frauds, "perfect girlfriend" scams, Craigslist scams, or "work at home” scams. Although you should definitely learn about those if you haven’t yet.
I will focus on financial scams because for some reason, people still believe that finance works a bit like magic...
How to spot an internet money scam ?
1. Returns are amazing !
Yes indeed, they will promise you the good stuff. Not 5%, not 10%, but more like 213% or more. Why such high numbers and not something more realistic ?
There is something called the psychophysics of chance that explain how sure events and very improbable ones are overweighted relative to events of moderate probability.
This is why people are actually more likely to risk their money for a bigger return than a smaller one. And they are able to accept much more uncertainty if the reward is bigger. A good example of this is the Lottery. You have more chances of being hit by a meteor than winning very big lotteries, but people still bet against these odds.
This is even more so when people have absolutely no idea of their actual odds or of the mechanics of the system involved. So beware of very high returns.
2. The Marketing is flashy !
Here is probably what you will be shown : pictures or videos of nice cars, big houses, private jets, nice suits and furnitures… Basically, anything that remotely looks luxurious. People will speak with authority, from a desk or sometimes from “their” garden. They will do anything they can to appear successful, knowledgeable and somehow like you. This is why they will always have some kind of “rags to riches” story so that you can relate to them or at least to their former self.
So beware of anything that sounds being oversold and if it looks like they are working very hard to recruit you.
3. It is all very complex but not for you !
The “system” is always something no-one can understand except a handful of geniuses. Sometimes it’s not even something that was discovered by humans but by a super computer or came out of some ultra-secret unofficial source.
But fortunately for you, this very complex knowledge is available for only the next 12 hours. All you have to do is click somewhere, give some personal information and probably your credit card details and that’s it !
You will then be able to use the “magic system” and/or replicate what these amazing “unbeatable traders” do.
It’s not always clear why they want you to get rich alongside them. Sometimes, it’s just because they want to “pass the torch” and help someone in need after they made so much money with it. Also at times, they are a bit more transparent and explain that they need the money to scale.
To expand a bit on the subject, let me give you my 3 basic rules about investing. This might help you to avoid these internet scams and also to be able to pass some “too good to be true” deals without any regrets.
3 Golden Rules of Investing
1. Don’t invest in what you don’t understand
I admit I stole this one from Warren Buffett, he said :
“I never invest in anything that I don’t understand”
You might think it’s easy and that you don’t do that, but the truth is that most people have no idea where their money sleeps at night or what exactly is in this fund their banker told them to invest in.
I am not talking about knowing every stock and every company that is part of your retirement plan you invested in. At the least try knowing more about the basics of the financial tools you are using. It’s hard to find someone who knows exactly how much money they have, what their net worth is or what kind of financial products they own.
You don’t want to ignore questions such as: what is the average return of your investments, what is your exposure to a certain kind of risk, and especially what is the fee structure of your investments. Ignorance is not an option, you can either hire people who will take care of your money and monitor what they are doing or you can learn about investing in different types of assets during your spare time.
2. Be ready to lose what you invest
There seems to be a misunderstanding about what investing is. When you invest in something, anything. You might never see your money back. I don’t care what your banker told you, what the real estate agent told you, or what you grandma told you. There is no 100% safe investment. Financial products, real estate, real economy or even raw materials, all of these can lose their value. Know that there are risks and that you can make a profit or a loss. Don’t forget that you will have to pay fees and that everyone will take a cut of your profits and sometimes will charge you on top of your losses. Know your risk and know your investor profile.
Also burn the words of Ray Dalio in your mind :
“He who lives by the crystal ball will eat shattered glass"
Unless you have superpowers that allow you to know for sure what will happen in the future, you don’t know what’s going to happen tomorrow, which stocks will rise and which one will fall. You also don’t know if that property’s value will be higher, lower or the same in 20 years. One of the biggest moves you can make to avoid losing money is to diversify your investments. William Bernstein in his book The Four Pillars of Investing says that
“The biggest risk of all is failing to diversify properly”
The modern portfolio theory is a good example of putting diversification at the center of your investing strategy. If you know that you will periodically suffer losses and that you are prepared for it, you won’t panic when it happens.
A good way to ensure that you have a better asset allocation is to invest in as many different types of assets as possible: stocks AND bonds AND real estate AND commodities AND business equity.
My goal is to help you think a bit more about what you can do with your money and how you can learn about investing. The more you will know about money, the less chances you have of being scammed or losing all of it during the next economical crisis which means we all experience more stability in the long run.
Here's how you can take action to optimise your investments:
Let me know if you have more specific questions regarding investing.
One of the best scenes in the movie Rounders with Matt Damon and Edward Norton involves no poker at all. It’s when the main character Mike McDermott goes through the different stashes in his apartment to get the cash he saved on the side to gamble all of it.
An emergency basket is just that: a reserve of cash that you set aside and don’t touch unless you need to. (you don’t have to hide it in your poker books by the way…)
Why do I need a stash/emergency basket/rainy day fund ?
When I work with people who want to improve their financial health, one of the first goals we set is to create an emergency basket. Even though this seems often very difficult or too early; building this cash reserve is one of the pillars of a healthy financial situation.
Having some cash on the side allows you to sleep better at night.
And when you are struggling with your finances, this is a must-have.
Building a cash reserve that will be used when something happens, gives you the power to take those hits.
When you have a nice budget and a beautiful financial plan, every dollar is accounted for. You are proud of your newfound control.
Then, what usually happens is that after a couple months working on your debt-reducing, savings and investing goals, something will happen. Your car breaks down, your laptop dies on you, you need a plumber or you are getting sued by this crazy neighbour.
Basically life happens.
And you will always use your emergency fund.
Because life... always... happens. (#micdrop)
A time will come where you will badly need this cash, and you will need it right away.
Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver. – Ayn Rand
How much money should I put in my emergency basket ?
It mostly depends on how “safe" you want to feel. We all have a different feeling of how much money we need to feel OK.
Most people need a couple months of expenses covered to feel better, some others just need a few hundreds in cash to take care of the unexpected. There's also people who want enough money to live without any income for at least a year.
A good rule of thumb is to plan for the next most likely misfortune that will happen. Just look at your last three unexpected expenses and use it as a basis.
How do I build one ?
You start small. And you also want to make it your priority. Any extra income or saved money should go first into your emergency basket.
Why ? Because if you postpone it and start doing something else with your money, the next unplanned expense will be a big financial blow. You might have to use credit or even overdraft because whatever happens will be urgent and will need to be taken care of right away. It always does.
Whatever your goal is for your emergency fund, set a short term goal. I find that 3 to 6 months works best to stay focused and reach a meaningful amount.
Divide up the total amount you want to reach in tiny time units. It can be months, weeks or even days. If you need to save 1200 dollars in 6 months, it sounds much easier to save 50 bucks per week for 24 weeks.
You might need to use this money before your basket is complete. That’s ok, the fund is made for emergencies, so use it if it’s an emergency.
What’s an emergency you ask ? An emergency is what you say it is, according to your criteria. (yeah I know: duh!)
It’s a good idea to make a list of what constitutes an emergency for you before starting your emergency fund to avoid this kind of dilemma in the future: “Shit I forgot about my brother's birthday ! Wait I have this extra cash for emergencies…” Bye bye emergency fund !
I can't tell you what is an emergency because it is different for everyone. Someone might absolutely need to change their laptop because they need it for work while some others cannot survive without their espresso machine...
What happens when I actually use my emergency basket ?
When you reach in your custom-made stash, wether it’s a real one or in an account, you will first feel warm and smart and say something like: “Yes, I am so smart !”
Unfortunately, you will then find yourself with a diminished or maybe depleted fund and we don't want that.
No worries. You can either use the money from other accounts (provided you know what you are doing with your money) to replenish it or just work back your way up as you previously did with small increments.
Don’t underestimate the “sleeping well at night” effect of the emergency fund. When fighting debt and overspending, being able to work on a simple short term goal that has an immediate impact on your daily life is huge. It gives you more control over your finances and it feels great.
It is also surprising to see how many people who consider themselves wealthy or fortunate, don’t have any cash available in case something happens. This has nothing to do with how much money you make or how much your net worth is. And it also does not have anything to do with your ego or believing the economy could collapse tomorrow...
Here’s a quick summary if you want to get started on your emergency basket:
The average household in the USA has above 15000 dollars in credit card debt in 2015. To give you some perspective: in UK the average credit card debt per household is around 2000 pounds (around 3000 USD).
In France and Germany, credit cards are a concept that is almost unheard of. Most people use cash, debit cards or other noncash payment instruments that don’t involve any credit.
I don’t really care about why there are different credit cultures, or why credit cards are not used everywhere. Instead, I will just look at what people don’t seem to know about credit card debt.
Why is credit card debt evil?
For the lucky ones who don’t have any credit card debt and who might frown upon such despicable habits, you can stop your reading now and leave us alone. Go do push ups or something.
First, here are a couple things everyone should know about credit cards:
When you use a credit card, you borrow money.
Most people think that a credit card is just a payment tool, it’s not. It is a credit tool, and a dangerous one. I will repeat this because it is very important: every time you use a credit card, you are borrowing money.
Now this is very important because it means that if you are borrowing money from a credit issuer, they will charge you interest on your unpaid balance. Just so you know, these interests will typically be much higher than most other forms of debt. How high? Well, the national average in the USA is above 15%, and if you have a bad credit score this goes usually well beyond 20%.
If you think this is normal, you got brainwashed. This is insane! This is theft! Just imagine that if you were to borrow 1000 dollars from someone at a 15% interest rate, in 5 years you would owe more than double the initial amount!
If you make purchases on a so-called 0% balance transfer card, you may still be charged interest even if you clear the balance every month! And if you believe that you can always repay your balance during the interest-free grace period (20 to 55 days), then you are mistaken or you don’t need a credit card at all. Use cash or a debit card instead. (Here is an article explaining how grace period works: clickLink / clickLink2)
Credit cards are not free.
I am sorry, they are not. On top of the crazy rates you will be charged to purchase things daily, you will have to pay fees. Some credit cards, particularly the gold and platinum or any kind of “elite” cards will charge fees for all these “additional benefits”. In the end you will always pay for these “benefits”. Even if they waive these fees the first year and you feel you are getting many “extras”, “points” or “services”; the credit card companies are the ones making money and you are paying for all these things.
Then you have the magic of “additional fees”: overseas they charge you an exchange rate transaction fee of around 3%. You will also have to pay “cash advance” interests (around 28%), and cash withdrawal fees are usually around 2%.
So overall, the cost of using credit cards is way above any other payment tool. Not only is it a very expensive tool to make purchases, it is also a complex tool. Most people are unaware of the hidden fees or of the real interest charges they are paying. Most people have no idea how much more it will cost them to buy this car, fridge or TV with a credit card. They believe they are paying the amount they see on the price tag whereas they are actually paying much more. How much more you ask? This might not be as bad as it looks right?
After all, it might be useful to be able to afford something without paying cash, and it might seem OK to pay for such a service, if it is reasonably priced…
But if you look at the average interest rate for credit cards, if you look at the average debt in the USA and if you look at the average length of these credit loans. You will see that on average, credit card debt costs an extra 2630 dollars per year on interests alone. This figure can go up to above 6000 per year! This money could be used to make other purchases, to pay back useful debt like a student loan or a mortgage. I personally don’t think this is a reasonable price to be able to buy this couch right away…
The question is now:
How do I reduce my credit card debt?
One of the most widely used technique is the DOLP (dead on last payment) which allows you to select the credit card you can pay back first depending on how many payments you have to make to fully repay it.
This is exactly why we need an emergency basket. An emergency fund where we have some money saved to use in case life happens. And don’t worry; you will use this basket sooner or later. For some people, having a couple hundred dollars is already a big safety net. Some other people will only feel comfortable with a couple months’ expenses saved in cash. This is your call but you need to have one!
Shift your mind-set
You are probably wondering: how am I supposed to pay back my first credit card and build a safety net? I don’t have any money to save. This is why I am in debt in the first place!
This might be the biggest factor in reducing your credit card debt: you need to change your attitude toward money. If you don’t believe you can save more. If you don’t believe you can cut your expenses or increase your income to pay back your debt; then you never will.
Even if right now you don’t see any way to save one single dollar or euro toward repaying your debt, you need to believe that you will find a way.
There are countless resources, ideas and articles about how to save more and get out of debt. You just need to find one.
Starting to look for solutions will have a huge impact on your bank account; it is a routine you will have to develop on a daily basis.
How can I save more today? How can I spend less today? How can I repay my debt faster today? How can I find a new way to increase my income today? These are the kind of questions you need to ask yourself every day.
Your whole attitude about debt and money must change if you want to get new results. Especially for people struggling with credit card debt, one of the biggest problems is that every time they think or talk about money, they have negative feelings of shame, regret, guilt and fear coming up preventing them to see any opportunity to improve their financial health.
Practical steps to reduce your credit card debt:
If you are struggling to find ways to repay your credit card debt, send me your questions and I will answer them.
Yes, no fancy quote today like “Your net worth is your network” or “When your self-worth goes up, your net worth goes up with it.”
Nope, your net worth is your net worth, that’s it. No need to sugarcoat it.
Your net worth gives you a good idea of your overall wealth and the health of your financial situation. For example if you have plenty of debt, and own very little, your net worth would be negative, which means your financial situation is not good. I don’t care how much money you are making and how big your salary or your car is. If your net worth is low or negative, it means you are not wealthy. Even though you might think you are…
So how do we calculate our net worth?
The basic definition is quite simple: Net Worth = Assets – Liabilities
For individuals, there are some things you need to know before starting to calculate your net worth.
You need to value only REAL assets
Most people think of their car, their TV or even their new BBQ as an asset. It is however very wrong. It is very rewarding to consider yourself as a business when looking at your finances. This is why using the financial accounting definition of an asset is much more helpful: “An asset is an economic resource. Anything tangible or intangible that can be owned or controlled to produce value and that is held to have positive economic value is considered an asset.”
To put it simply:
An asset is something that increases its value over time and that generates cash flow.
For our purpose we will consider that anything you own that will likely increase its value over time OR that generates cash flows is an asset.
Examples are: cash, stocks, bonds, real estate, shop ownership, life insurance, retirement plans, artwork, jewelry…
Do NOT include your primary residence in your calculation
Why? Well any way you look at it, your home is a liability. Even if you own your home, you need to pay your mortgage back or cover all the costs of repairs, insurance, maintenance, taxes and so on.
So instead of putting money in your pocket, your home costs you money every day you live in it.
We could maybe argue that if we sell the property with a profit, we would then make some money right?
The problem with this argument is that because you are living in your home, you cannot leave it and sell it when you want. Not only is it very illiquid, it also means that you first need to find another place to live in. And guess what? Yup, this costs money as well. So I strongly recommend you to include only the other properties you own in your calculations, because they are the ones that can bring you money without having to sleep outside.
Robert Kiyosaki the author from “Rich Dad, Poor Dad” sums it up well in this 2 minutes video
You need to make adjustments
#Any taxable account will be taxed according to the capital gains tax in your country and this should be accounted for. If you live in Denmark, you will have to deduct around 40%, 35% in France, 28% in UK and USA and if you are lucky and live in Belgium or New Zealand that would be 0%.
#Retirement accounts and any individual retirement account or fund will also need to be adjusted according to your tax bracket. Why? Because most of these accounts allow you to deduct your contributions from your tax declaration but they are not exempted from taxation when you take it out in retirement. Some of them work the other way around, so make sure to check what kind of an adjustment you should make. (Usually between 15% and 28%)
#Any jewelry or art you own should be discounted with the “pessimistic look” ratio, which is at least around 50%. (The “pessimistic look” ratio is a secret ninja technique used by most smart buyers)
Now let’s talk about liabilities
Anything that takes money out of your pocket on a regular basis is a liability.
Examples are such as: your mortgage, your credit card balances, your student loans and basically any kind of debt you have. Don’t forget to include medical bills, personal loans, taxes due and any outstanding bills.
As Robert Kiyosaki explained earlier, even things you own could be a liability: a house, a boat you have to maintain, a car that needs repairs and insurance, and so on.
Here is an example of what a net worth calculation look like:
So now, what does my net worth means?
If you are a decent human being, you should have calculated your net worth and you now have a nice looking positive or negative number in front of you. This gives you a good idea of how well you are doing right now with your finances.
This does not mean you are better than your neighbour or more stupid than your friend and it does not mean it will stay the same forever.
Please don’t use it as a way to compare yourself with others or to pity yourself. This is just a scoreboard, an indicator of how well your finances are doing.
What’s important is how you will use this information:
What is your next step?
Are you surprised by this number or did you think it would be lower or higher than it is?
How much net worth would you like to have in one year, ten years?
The biggest surprise for many people is to realize that although their income has been increasing over time, their net worth is still very low.
This is because of something called “Life Inflation”: the more money people earn, the more money they tend to spend. And even if it their lifestyle is improving and they are making more money, their assets don’t outgrow their liabilities.
The problem with Life Inflation is that if something stops their primary source of income, most people would not be able to afford the same kind of lifestyle and would usually suffer from it.
Being aware of this concept allows us to save and invest more toward our assets and build our net worth steadily over time. Having a positive net worth gives you more financial freedom and allows you to become more and more independent from your main source of income. If you are working on building your net worth, you will have more flexible choices in your career and in your life, and you will be more prepared to whatever comes next.
If you want to improve your financial goals, here is what you can do right now:
Let me know if you have any comments or questions about your net worth.
You might have read this title a couple times, just to be sure. And yes, I am saying that you should not care about saving money. So why is that?
There are only two ways in this world to get richer
A Make more money
B Spend less money
(If you know another one please send me an email to claim your free Nábrók)
Which one of these do you think you should focus on? Unless you are an oniomaniac (sounds way better than compulsive buyer right?) you should definitely focus on making more money.
There is a limited amount of money you can save because the money you are already earning is limited. But there is absolutely no limit to the amount of money you can make.
Spending hours trying to save a couple bucks, or bargaining to get a 5% discount is never going to have a great impact on your bank account.
And if you control your spending like a Zen master… you will very likely live the life of a Zen master. That’s ok if you reached enlightenment otherwise it’s just depressing.
This is one of the reasons why I believe budget planning does not work for 99% of people.
(I however believe in financial planning which has a different approach)
Making more money, focusing on increasing earnings, getting a raise or a better paying job, finding a new source of income and new opportunities of investment; all these will definitely have a big impact on your financial life.
So why don’t we all make more money instead of trying to save more ?
One of the most common reasons is: we usually don’t believe we can earn more.
We are trained by our teachers, our managers and our environment to think we are worth a certain amount of money and that our work is correctly rewarded.
We might sometimes think that we deserve this "4% raise" and that we could find a slightly better paying job. But mostly, people don’t want to go through the hassle of trying to earn more because they don’t think they can and frankly they prefer to stay safe and comfy.
Even people who think they “deserve” more, don’t do much about it except complaining and bitching about how life is unfair, how unlucky they are and how lazy their rich boss is.
There are always good “excuses” that prevent us from taking the next step: the studies, the family, the partner, the time, the health, the dog, the lack of information…
Look at people who are complaining about money and always have "excuses", you will find that these people not only are not getting richer but are also pretty unhappy. Now if you find yourself in the same state of mind, shake it off. This state of mind will not attract money and it will not allow you to get where you want to go.
Warren Buffet, one of the wealthiest men on the planet did not wait for circumstances to be right or for the right opportunity; he always worked hard for his money.
One of his first business ventures: Buffett sold chewing gum, Coca-Cola bottles, or weekly magazines door to door. He worked in his grandfather's grocery store. While still in high school, he made money delivering newspapers, selling golf balls and stamps, and detailing cars, among other means. On his first income tax return in 1944, Buffett took a $35 deduction for the use of his bicycle and watch on his paper route. In 1945, as a high school sophomore, Buffett and a friend spent $25 to purchase a used pinball machine, which they placed in the local barber shop. Within months, they owned several machines in 3 different barber shops across Omaha. The business was sold later in the year for $1,200 to a war veteran.
If a kid or a teenager can have that kind of spirit and attitude toward money, you can too !
Here's one advice I got from some very successful people : get committed to earning more and to have a big impact on your income.
How? Start looking for new opportunities, think of new ways to increase your salary. When was the last time you asked for a raise, when was the last time you thought of starting a business or developing an idea but did not follow through?
Start investing now, don’t wait.
If you want to get richer and not just fantasize about it, here is an exercise you can do right away:
1-write down the last time you had an income increase and the reason why it happened
2-write down how you could use this to get your next income raise
3-write down 5 ways you could make money and the reasons why it would work
4-describe how you would use this money and how it would improve your life
Also let me know what you think. I want to know what is it about money that makes you angry or frustrated.
This is the question I get all the time. When I hear it, I cry inside. Literally…
Yes, I know that we live in a society where finance and money management are not very sexy topics and that most people have no idea of what they can/should do with their money once they actually managed to save some.
But I still get bubbles in the brain when I hear these words: “What do you think I should do with my money?”.
I don’t think you should do anything with it
I don’t care. This is your money; YOU should know what YOU want to do with it. Don’t just ask people what you should do with it!
If you are actually asking this question to people or even to yourself, it means you haven’t done anything with it and that you are not planning to do anything about it. You are just waiting for someone to tell you what to do, and you hope that you will get richer by just following the instructions...
So my first advice is: don’t listen to anyone else ! (and also don't ask me this question anymore) This is your money, so YOU should know what you want to do with it. You can politely listen to any advice, but at the end of the day, only you make the decisions. So keep only what’s useful to you and forget the rest.
People are so desperate and so lazy that they expect a nice short answer like: “buy Stock A and bond B”. People who ask this question don’t realize this is the wrong question to ask. A better question would be something like: “What do I want to do with my money?”.
Depending on what your goals are for your money - buying a house, starting a firm, planning for retirement, saving for a car or for your children's education, getting high returns – you will make different choices about your investments. Defining these goals and knowing what you want your money to do for you is the first step in your investment decision.
Have a goal for your money
Ok, now let’s say you have a slight idea of what you want to do with your money. You want to invest it for A, B and C. What do you do? If you are like most people, you do nothing. You just stare at your bank statements each month and pat yourself on the shoulder because you are actually saving money. Yeah sure, you know there are some things you could do with your money like investing in the stock market or buy some shares in a mutual fund or something like that. But it all sounds very complicated and you heard on the television that the economy is bad and you also heard about that story about people who got scammed and lost everything. At least you are saving money and your money is safe, in the bank’s vault. Also you are lazy, or you really don't have time for that, you are so busy with kids, the job, the last episode of game of thrones...
Let me be clear: the worst thing you can do with your money is nothing!
Well, first there is inflation of course (use a condescending tone if you quote me); the average inflation rate for the last 20 years was between 1.5% and 3.5 %. It means that everyday your money is sitting in the bank, it is worth a little less. And that’s really not the biggest problem. If you don’t invest in anything you are not making any returns. The average yearly return in the stock market is around 8% after inflation. This is of course on average, but it means that on a long enough period, you will make 8% after inflation on your investments on the stock markets. If you have not invested any of it, you are basically losing this opportunity of 8% plus inflation.
It also works with other types of investment: any money you don’t invest will suffer both from inflation and from the opportunity cost. You could have invested that money in bonds, in real estate, in a business or even a savings account or a retirement plan. You would still have some return compared to your amazing 0% that most checking accounts offer.
Now you should feel a bit worse inside. Good, it means there's still hope for you.
You don't need to be an expert to start investing
In his book “I will teach you to be rich”, Ramit Sethi makes a nice analogy between food and money. He compares our food and fitness habits with our personal finances habits and shows that people focus on the little details more than the core issues. Like for example how people debate about eating more carbs or more veggies, which types of supplements you should buy, what kind of exercises are best for your abs or biceps. But every one of us knows what the basic principles are to be fit: eat less (and better) and exercise more.
It’s the same with our money: don’t focus on which stock to pick or which fund to buy, don't get lost in the details and the huge amount of data. You just need to start investing now. You can make any investment in the world, you will still be better off than doing nothing with your money. Of course discussing how to invest will also be important in your investment process, but in the long run not investing your money will be what really hurts you.
On average, millionaires invest 20% of their household income. On the average !
So next time you want to ask the dreadful question, ask yourself instead "What is my next investment?".
To get started:
First step: write down what you want to do with your money. What are your goals, projects ? And when will you need the money, 5-10-20 years ?
Second step: start investing today, put your money on a savings account and pick one investment for your goal.
In this article, I explain the golden rules of investing and how to avoid scams.
The average training budget for companies is over 4 millions dollars per year and in the US over 160 billion dollars are spent each year on training alone.
Training is indeed a big priority for companies and according to this survey, training and learning opportunities are more and more important to employees these days for job satisfaction, especially among younger generations.
Quote: “Given the changes in the way organisations are operating and the shifting demographic composition of the workforce, offering career development opportunities to employees could be extremely beneficial to employers.”
The overall demand in quality training and development is high and companies are doing everything they can to satisfy their precious workforce.
Unfortunately, too often the trainings seem to frustrate employees or to leave them disappointed.
Most trainings are aimed at teaching people to know more and are mostly job specific. But when you look at criteria for job satisfaction, this kind of training only comes in 20th position. What is much higher in the rankings are the following: trust between employees and management, opportunities to use skills and abilities on one’s work, relationship with supervisor, overall communication, and career advancement opportunities.
Unfortunately not many trainings offer insight on these topics and when they do, they often do it wrong.
So what’s wrong with most employee trainings ?
It’s too short:
When you attend a seminar or a class, it’s usually a one day event. Sometimes a couple days if you are lucky. But on average people spend very little time in training each year. In the US, it can be as little as one minute a month !
We expect people to sit and digest slides and a whole year of training in one big gulp. The truth is most employees have high expectations from training and they want more of it.
Sometimes, a very condensed training is made more palatable with the help of mnemonics, visual content and some practical training but you will still find many trainings where people are sitting in a chair while staring at a powerpoint for several hours. Then after a few days, most of the training is forgotten and people get back to their routine.
It’s unpractical and content focused:
Only 12% of learners say they apply the skills received from training to their work. What point is there to learn about MBTI, Process Com or sales techniques if people don’t use it ?
Trainers and coaches present people with new tools and concepts and after a couple exercises you are expected to apply it in your everyday life. Implementing new habits and developing new skills require more than just knowledge.
There is a trend nowadays to make the training more experiential and to make sure people enjoy it and actually use it. Unfortunately there is still little training which aims at developing skills rather than transferring knowledge. One key way to make sure you get a return on investment in training is to test the skills learned throughout the year and to have strong follow-ups and performance feedbacks for the trainees as well as for the trainers.
It’s not individualised:
In training, classroom style is still king. Technology has provided us with more delivery options than ever before. However most companies still teach in classrooms with a single instructor addressing the crowd. It represents more than 75% of trainings.
There are other methods which are proven to be more effective than instructor-led training. For example coaching and mentoring is one of them, not only it is more efficient, there is usually a much higher satisfaction and engagement from employees who have this opportunity.
Other types of training like e-learning, on-the-job exercises and peer-to-peer learning are still underexploited and provide an important variety in the employee’s experience.
The challenge is to deliver the training people want and not the training the company ordered. People learn best when they are engaged and have a strong desire to learn. If they are not into it and don’t see the point, they won’t retain the information.
The first principle of learning is readiness which implies a strong focus and an eagerness to learn. Making sure the training you provide to employees is the one they want is the best way to ensure they will get the most out of it.
What can we do to change it ?
If you are an employee and want more quality training: ask your management for more frequent and longer trainings which correspond to your specific needs. Don’t hesitate to handpick something you are interested in and to present it to your management.
If you are an employer or in charge of training and development at your company: make sure you involve your employees in the selection of the trainings and that you get feedback from them once the training is done. Asking for follow-ups from the trainer would also be a big plus.
Sources and references:
We have all endured bad feedback and had at some point to give it or to receive it.
Non constructive criticism and gossip is all about judging people and putting them below us. If you want your spouse to leave you or your colleagues to hate you, this is exactly what you should do.
I am not going to talk about unsolicited advice which is just a narcissistic way to speak about others when you in fact just want to talk about yourself. Also, it’s very rude. So don’t do it.
How to receive feedback ?
First, with humility. Especially when it’s praise.
I remember someone giving the best answer you could give to a compliment: "Thanks”.
I haven’t found better yet.
What about negative feedback ? If the feedback is uncomfortable, use the baseball technique (thanks Neil Strauss for the insight) : you first catch the feedback in your hand like a ball. Then you look at it and you decide wether it’s relevant or not. Then you choose to discard it or to keep it for later reviewing.
What’s interesting about this, is that it takes the emotional baggage away and lets you decide how you want to deal with it.
Just remember that when one person says that you are an asshole, you don’t care. But if fifty persons tell you you are an asshole, you probably want to look into it…
Why Feedback ?
Now if we talk about constructive criticism, we need to talk about the why ? Why do we give feedback ? And why do we want it ?
Constructive (and we could say proper) feedback is about raising people and making them better.
There are two criteria which I think are necessary for a good feedback.
If we think about how we can make people want our feedback or if we just ask ourselves the question first: “do they want my feedback ?”. You have already solved most issues with criticism and unwanted advice.
Make sure people want your feedback before you actually give it to them. Even when giving advice or feedback is your actual job and you are being paid for it, you want to make sure people are receptive to what you are saying. So you want to create the conditions for being heard. One way to do it is to focus on the positive and to build trust at first. Once you have a positive relationship with someone, they are much more likely to listen to what you have to say.
Once you have created a relationship and that your communication is well received, don’t screw everything. Being constructive means you want to build something. If your feedback is in fact only criticism, what exactly are you building ? Being helpful does not mean that there are no flaws or that everything is perfect. It just implies that you are always aiming at creating value for them with your feedback, that you want them to get something from you. If you think about it, feedback is not about making you feel better, or making them feel worse, or not even about pointing out what’s not working. Feedback is about improving. We want our feedback to help others and we want the feedback we receive to improve ourselves.
What and How ?
During a recent workshop I learned one method of giving feedback. Something you could call the Wow technique.
The Wow method consists in dealing with the WHAT and with the HOW. (hence the catchy phonetic mnemonic W-How, I am just adding the panda for extra impact)
The method goes like this:
This is pretty simple and also very efficient.
Why does it work ?
When you focus on what you liked, you have to find positive things. And the beauty of it, is that there is always something you can enjoy in someone else’s work or performance. It could be their efforts, their attitude, their courage, their persistence, their technique...
Just to be clear, this is not about sugar-coating it. This is about finding what you actually enjoyed about their piece. And when you find something you genuinely like and you tell them. They will feel it and they will thank you for it. If you do this consistently, they will always want your feedback because they will know how much you appreciate and value their efforts.
With the next step, you focus on what can be improved. Notice that there is nothing in your feedback which could be seen as negative or criticising. This is designed so that the feedback is really constructive and can be heard and understood. This is not about you, this is about them and what they could do better.
Please, please, please before going out and using this method, remember to give feedback only to people who actually ask for it or want it!
The goal is not to get you to talk to your brother in law and tell him what you like about his style and how he could improve it…
In a nutshell:
Let me know if you find it useful !
If you don’t know it already. I am a big routine geek and I love repetition.
Let me tell you about the three smallest things I do everyday to show you how lazy I am.
5 minutes meditation
I failed 20 minutes meditation, I even failed 10 minutes meditation, I have no excuse not to do five minutes in the morning and in the evening and it is the only thing that stuck so far. Meditation does not come easy to me. Sitting still and closing my mouth was like chinese torture to me a while ago and is still challenging. I think everyone knows how good meditation is for you, for your health, your mind, your memory, your focus, pretty much everything… It probably even saves polar bears.
Whatever you do for yourself every day, take 5 minutes and give yourself the gift of time and chill.
Nothing too complicated, I just write down three things I am grateful for every day. It could be living in a healthy body, having wonderful friends and family, or just something as simple as being able to enjoy the sun outside or the wind in my face.
If I cannot write it down, I will just think about it quickly in my head. It’s funny to realise that I had to force myself for a while and now if I don’t do it, something does not feel quite right.
Gratitude makes my mood better, improves my overall view of the world and makes me less likely to indulge in negativity or complaining. It even improves my communication with my wife and kids as we share what we are grateful for instead of just badmouthing people and moaning about our day.
Very basic health
Two glasses of water and push ups/pull ups. I tried supplements, spinach and eggs for my breakfast, or a strict workout routine every morning. I have found that I can drop all of these when I am traveling or on vacation, or basically if anything comes up... So I kept reducing it and reducing it to the things I can do anywhere, anytime. Again, I have no excuses not to do those healthy habits. Even a specific number of reps was too much as sometimes my body felt different and I did not want to work out as much every day. So my rule for exercise is the following: “enough to feel good”. Guess what ? I always can tell if it feels good or not.
So the insight for me from all these micro habits (and the others small things which create my daily routine) is that I only keep what sticks. I know that if it’s too big or too complex I will drop it. This is how I work and it is part of who I am. I don’t want my daily routine to become this sacred ritual that I can’t move away from or that I cannot skip without having a “bad day”. They are small habits that build on each other and can be dropped or added anytime and anywhere and rely only upon myself.
There is this book called The Willpower Instinct in which the author explains that eliminating excessive options and anything that depletes your willpower basically reduces the amount of decisions you have to make. The less decisions you have to make, the less effort you have to exert and the easier it is to do the things that really matter to you.
There are some days where I will have time and energy to do a full routine which is more complex and has a lot of other elements in it but I also know that I can always take 10 minutes to do the most basic version of my routine which requires very little effort.
Whatever you want to do in the morning and evening, make sure these routines work for you and don't require too much willpower so that you will enjoy doing them whatever comes up !
I am happy to discuss your daily routines or mine in more details, so let me know if you want to read more about them !
Improving your communication is close to improving everything else in your life. No kidding.
Skilled communicators are able to make you think of something and let you think that was actually your idea. They can agree with you while convincing you of something else. They can describe what you want better than you. And it is oh so pleasant to listen to them all evening long.
Not only do great communicators make more money according to studies, they also have stronger relationships and marriages and have a higher self-esteem.
So let’s get to it shall we ?
I have found some common important elements of efficient communication. Developing any of them guarantees that you will see great improvement in your interactions and might even get you invited to this VIP event you have been dreaming about.
Excellent communicators master active listening
The first element of great communication is to actually shut up.
Active listening is not just about staying silent (although it is a big part of it). Giving others the space to speak - to really speak - is something you rarely see these days. And when you are staying silent, the trick is to not just wait for your turn to speak, thinking about what you are burning to say. The key is to be present and to actively listen to the person in front of you. Drink their words as if they were the best water you ever had. Savour them and let them fill you up, listening to every word they utter. The language they speak will give you amazing insight into who they are and what their needs and beliefs are.
In Neuro linguistic programming there is a broad concept called sensory acuity under which you can find several useful tools to boost your active listening skills. One of them is sensory specific language. Every person uses different representational systems to describe their world and we all have a favourite one.
These representational systems are sensory based : visual, auditory, kinaesthetic (touch), smell and taste. Once you pay attention to what words people use, you will find they have a favourite sense they use to illustrate their speech. For example a visual person like me will use a lot of visual words or expressions like: "do you see what I mean ? This is perfectly clear to me. Let’s focus on this. He is really bright ! Let me clarify something. That looks good !”
Whereas a more auditory person would use more of the following: “You are not listening to me. Did you hear that ? It needs some fine tuning. We all have a voice. Wait until things get quiet. Let’s discuss this another day.”
When you pay attention and clearly see which sense people prefer. You know which words they are more likely to respond to. They will give you some key words and you want to make a mental note for later as you know they will respond well to them.
A good question to ask yourself when listening to someone is: What is their preferred representational system for communication and what are some of their key words ?
Listening to their words is powerful. Listening to their body is even better. It’s no secret that body language gives away a lot of informations. And I am not just talking about knowing when people lie to you or who stole the cookies. But also about how they feel, in which mental state they are and what kind of unspoken message they are passing on to you. Non-verbal communication is according to many studies much more important than we think and might represent two thirds of all our communication. (although nobody agrees on the numbers but you get the idea…)
Our body gives away a lot of information through our level of eye contact, our tone of voice, the speed of our speech, our body posture and gestures, just to name a few. The problem is that we usually don’t pay much attention to the body because we are so focused on the words or what we want to say next. A good way to build your awareness of body language is to start looking at it while you are listening. Just notice something about their body, their voice or their face that you haven’t seen before and more importantly imagine what it means or what they are trying to convey through this non-spoken communication.
A question you can ask yourself: What is their body communicating right now ?
Focusing on their message is probably the biggest thing you can do to improve your listening skills. Too often we wait for someone to stop talking so that we can answer. When we are focused on our thoughts or on how we will respond, we don’t fully grasp the communication presented to us. In fact, most people cannot even repeat what another person just stated. Especially if that person has been speaking for more than thirty seconds. Would you be able to summarise what a person just told you ? Or even repeat some of her sentences ? If not, it probably means that you have not been paying enough attention. Sometimes we nod, we agree, we say yes and then we move on to our comment. Being able to acknowledge what the person in front of us has just said, or to just explain what we understood from it is a powerful sign of our listening and people will love you for it. Make sure you remember what people tell you. Make a mental note of something interesting this person just told you. If it makes you think of something, keep your reaction for later and wait until they are done talking. It will help you discover what their message really is about.
The question that works well for me is : What do I understand from their overall communication ?
Great communicators create space for efficient communication
The second element of excellent communication is to create the conditions for it.
Rapport is another concept from NLP that is widely used and maybe abused. It’s defined as the ability to relate to others to create a climate of trust and understanding. Unfortunately, it has been reduced sometimes to mirroring people or repeating their words to get what you want from them. Even though it is true that having a certain level of coordination or mirroring with the people you encounter can help your communication, it is hardly a way to trick people into doing certain things. The key to rapport is in the definition: a climate of trust and understanding. You cannot have real rapport if you don’t build genuine trust and understanding. You cannot fake trust, not for long anyway. Some ways to build rapport is indeed to adjust your body language so that you make the other person comfortable. It does not mean mimicking them, but if they are sitting and you are standing. Sitting along them might be a good way to put them at ease. Looking in the same direction and using words they enjoy would also contribute to such a climate. Mutual attentiveness is part of rapport and this is why active listening is so important. If you actually listened, when it's your turn to speak you can show how well you have listened and people will notice !
Information cannot be pushed into a brain, it has to be pulled in. One of the three pillars of delivering a powerful speech you can find in "Talk like TED" is passion. If you want to create a human connection and make sure your message get across, you want to be passionate. If people does not feel any passion or captivating feeling coming from what you are saying, they will lose interest very quickly and move on to something more enticing. Whatever you are speaking about, make sure to choose a topic you really care about. Researcher Melissa Cardon who studied passion and its correlation with entrepreneurial success said that “People who are genuinely passionate about their topic make better speakers”. If the current theme does not suit you, then reorient the conversation on one that you enjoy. Only then, can you avoid the trap of falling in unending and boring discussions. If a conversation is not interesting, it is your responsibility to make it about something interesting. This means of course, knowing what interests you in the first place and sharing it. It does not matter which topic you choose and wether you are a hobby horse fan or a stamp collector. As long as you are passionate about your subject, people will relate. Sometimes they won’t and this is why you want to be able to calibrate to your audience if needed. People who are curious and can discuss any subject with enthusiasm are the ones that get the best press.
Impactful communication happens when excellent communicators make a strong impression with the smallest amount of words. It is like using a hammer instead of your fists to hit the nail. Impactful communication is built around three main mechanisms. Pattern interrupts, curiosity arousal and powerful metaphors. I remember this great example of a textbook impactful communication. It was a radio show and the topic was regret. Guests were speaking and suddenly the host starts saying loudly: “three legged dogs ! three legged dogs !” And of course everyone stops talking and they start asking what about three legged dogs ? And to no surprise he starts explaining why three legged dogs are the perfect example of how to deal with regret and difficult events. He built some curiosity for a while and everyone just went completely silent and listened to his words religiously. Then he delivered this excellent metaphor of a dog that lost a leg after an accident. The dog does not spend one second complaining about it or regretting his lost leg. He starts running right away. Of course he struggles and falls pitifully. But he is still a dog ! He does not doubt for a second that he is a dog and keeps behaving as a dog. His mood is not affected at all by his lost leg and he starts learning right away how to run on three legs. Actually most of them seem they even run faster after a while with three legs than with four.
And here you have it laid it out for you: a strong pattern interrupt, “three legged dogs!”. A few words that catch people’s attention to stop the current flow of the discussion. Then the curiosity arousal part: you don’t get into your message right away ! You build it up, you explain why this is great stuff and why it is so interesting and where it’s coming from or how it impacted people so much. This will make people want to hear what you have to say even more. And they will actually listen, it makes certain that they really pay attention. The last point is: you have to deliver the goods ! You give now a powerful metaphor. We love stories and a good story speaks to us on many levels. It resonates with us much more than just raw data or logical arguments. Make sure this story or metaphor is indeed interesting, enjoyable and entertaining for the people listening to you. Deliver it correctly and it’s a home run.
Powerful communication benefits all
Mutual help is not only the way to get a better relationship with your neighbour. It is also key to almost all communication. Most people like to speak about themselves and themselves only. If you show interest in them and honestly try to help them or give them value, they will listen to you. And chances are, they will reciprocate. Try to find which values and needs they have so that you can find how you can help them best. You want to ask yourself what you can do for them, how you can give them useful or entertaining information. How can you leave them with the impression of increase for having met you ? When you start thinking less about your own agenda, and when you genuinely want to help, people feel it and it’s exhilarating both for you and them. Reciprocity is a powerful social rule and ensures that any act you carry out on someone will likely be repaid in some way. Even communication falls under this reciprocity norm. So make sure you are using your communication to give value to people. This is not just to make the world a better place, but also for you own sake.
A great way to communicate passionately is to inspire people through challenge. Wether it is through your enthusiasm or your dedication, a positive attitude is contagious. If you share your interests and make it so that other people want to follow your lead or associate themselves with what you are doing. You will make a big impact on them. This is not something we do very often, and we actually tend to avoid motivating or challenging other people. First because it feels awkward and it might even make us seem arrogant. And also because we tend to respect the status quo. I love it when people share their dreams and projects with me. But I also feel a bit out of place when I ask them : “When will your book be finished ?”. I know this is uncomfortable, and sometimes more for myself than for them. But I also know that at the end of such a conversation, their motivation is actually reinforced because I respect their word and I trust them for being able to carry out their project. I would not start asking people about it but I definitely am going to keep asking questions about the how and the when if they share their thoughts with me. Not only will I ask them to describe their challenge to me, I will also keep them accountable for it if they want to. A conversation which usually starts with surprise and a bit of fear at first, usually ends up with a big smile when they tell me when and how they will carry out their project and agree to send me an email when they are done. Just give people an opportunity to amaze you !
Make requests. We all have needs and in order to fulfil them we sometimes need to ask for help. If there is something you would like from someone, just ask. People who have the will to ask for what they want share a multitude of positive traits. One of them being humility: they know they need others to achieve more. Courage: they have the guts to ask for what they want and be told no. Vulnerability: they are ok with giving the power to someone else or to put themselves in an asking position. Openness and gratitude: because they value what others have or know and will put themselves in the position of being indebted to them. People who know how to ask also have strong social skills and are good at negotiating because they know that in order to receive, you first have to give. Asking people for help is also known to improve relationships as in the famous Benjamin Franklin effect. So next time you speak with someone, make sure to ask them for help or advice, it will improve your communication and your relationship both.
To summarise, here are a few practical ways to improve your communication:
Performance coach, world traveler, tribe builder, NLP enthusiast and mnemonist. I am passionate about self-development and life changing coaching tools.
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