Step 2 - "Your Money or Your Life - Transforming Your Relationship with Money and Achieving Financial Independence"

On to step 2........ 

A.  What is your "real" hourly wage?

The book asks you what your definition of money is.  People put a lot of power behind this piece of paper, the round piece of metal sitting in my hand, the electronic number that gets transferred through cyberspace with the swipe of a credit card.  In short, it is a tool that is used as a means of exchange.  It is not good or evil.  However, how we use it can have positive or negative consequences. The authors state: "Money is something we choose to trade our life energy for."

Life energy is the time you have available before you kick-the-bucket.  We exchange that time for money in the form of work: in order to pay the bills, buy things that we enjoy, to pay for a future trip, or whatever it is you are trying to afford.  Every hour that you work for money is one hour that you are not: reading a good book, singing a song, playing soccer, gardening, doing anything that fulfills you (unless of course you enjoy your work).  How do you currently spend your life energy?  How are you going to spend the life energy you have remaining?

What is your "real" hourly wage?  This is NOT the money you get paid per an hour of work that you put in.  example: $15 per an hour x 40 hours worked per a week.

The "real" hourly wage takes into account the amount of time that you use to beautify yourself in the morning, the cost of your wardrobe or uniform that you need specifically for work, medical costs and time off related to the stress of work or illnesses you get from other coworkers, the amount of time you take to get to and from your place of employment, the cost of vacations that you take so that you can recharge, and the cost of lunches among other things.  When I tallied this in May 2003 I was surprised at my true wage.  My hourly wage prior to this calculation was  $17.25, and afterward I found out that it was actually $7.02. A copy of my information is below.

Figure 2-1: My real hourly wage

Was it worth it for me to trade 85.75 hours of my life energy to earn $7.02/hour?  I continued with this book because it was not.  I wanted to find out where all of the money that I traded my time for was going, and how I could improve my situation.

B. Record ALL the money that comes in and goes out of your life.

This might sound worse than it actually is.  I carried around a notebook full of college ruled paper everywhere I went.  If I found money on the ground, I stuck it in my pocket and recorded it in my book.  When I went to the vending machine at work and bought a packet of candy, I wrote the transaction down.  The idea of tracking every penny might seem intimidating to you, but it is important.  If you cheat once, whose to say you will not cheat again on you paperwork.  What do you gain by cheating yourself?

I used a big notebook, because I wanted a big reminder in front of me to keep me moving forward on my goals.  The book mentions different methods people used to record their information.  Some saved all the receipts at the end of the day and recorded the information on their computers, and some had small notebooks that fit in a purse or wallet.  The great thing about this book is that it encourages you to follow this path your own way.  So as long as you do it, it does not matter the tools you use: computer, paper, fabric, etc.  It is your path.

Figure 2-2: Tracking my money

Next, step 3: Analyzing the data you have collected.

Note: Step 3 is a big one. It took me a little time to put it together, but it was well worth it.  Basically, I found out how I was spending my life energy, through the items that I bought.

Step 1 - "Your Money or Your Life - Transforming Your Relationship with Money and Achieving Financial Independence"

As I promised in a previous post, here is how I worked through the steps from "Your Money or Your Life - Transforming Your Relationship with Money and Achieving Financial Independence".  This book taught me how to evaluate my relationship with money, and align my spending with my values. 

Chapter 1 from this book is titled The Money Trap: The Old Road Map for Money.  Step 1 of the program is contained in this section and consists of two questions: "A. How Much Have You Earned in Your Life? B. What Have You Got to Show for It?"  It is asking that we examine our past so that we can work on our future.  It is not meant to make you feel bad about yourself.  It is a tool to show you where you have been.

It starts out discussing how people associate self worth with the jobs that they hold.  i.e. A person may consider themself someone of importance if they are a doctor, and not as important if they are a janitor.*   When talking with friends and/or family members are you asked how your job is, what you do for a living, discuss new "toys"/status symbols?  If you do not have a job, do people have a hard time holding up a conversation with you?  Instead of being labeled by the job you perform, what if you could be known for living by your values, or being able to fulfill personal goals?

The book then asks how fulfilling your life is; how happy you are. Do all the extra hours that you put in at work, the stress of the job, the paycheck, lead to fulfillment within your life?  After all of your basic necessities are met, are you truly happier the more you upgrade your toys?  If not, then why are you working where you work, and spending your money as you do?  You obviously have received something from the jobs that you have held otherwise you would not be doing them, and there was something that lead you to buy that expensive shiny new car.  At what point would you consider that you have reached your level of fulfillment, where you are truly happy? Happy with the work that you do, the company you keep, the money you earn, the items you buy.  The point at which you have everything that you need, have items that bring you enjoyment, are living in alignment with your values, and are truly happy is known as "Enough".  If you add one more thing to the list it will not bring you higher returns.  The book calls the excess "clutter".  Having "Enough" is different for everyone.

Now to the two questions:

"A.  Find out how much money you have earned in your lifetime-the sum total of your gross income, from the first penny you ever earned to your most recent paycheck."

The book suggests that you look at your Social Security statements and/or income-tax returns to see how much money you have earned since the beginning of time.  Also include cash flow from any investments such as home rentals and royalties; and include miscellaneous things such as lottery winnings, garage sale money, bottle return deposits, etc.

I did not dig too deeply into this.  I did look at my Social Security statement, and was amazed that I had earned quite a bit considering my age.  So where did all the money that I earned go, I asked myself?

Question two.........

"B. What Have You Got To Show For It?"

I have to admit that I did not complete this section.  The idea of categorizing all of my things, and trying to figure out how much I could get for it if I sold it in a garage sale, was a little overwhelming.  However, I can see the benefit of completing it.  Basically, they are asking you to determine your net worth. i.e. assets minus liabilities.


The book asks you to list all of your liquid assets such as cash, stocks, bonds, life insurance cash value, etc.; and the value of all of your fixed assets such as your car, home, t.v., boats, antique furniture, books, etc. (This is the money that you could get for your items if you were to sell them today, not how much you paid for them.)


 You are then asked to compile a list of all of your liabilities, also known as debt.


Once you have the amounts for your assets and liabilities, what is your net worth? ( Assets minus Liabilities) This can be an upsetting calculation for some, and exciting for others.  Just realize this is allowing you to establish a foundation, giving you some perspective, as you complete the remaining steps.  From here great things happen.  You have just been shown how you have related to money in the past.  The next steps help you direct your relationship with money to align it with your values.

 Even though I did not complete all of step 1, I did not let this stop me from working on the remaining steps.  

Next: Step 2 - What is your "real" hourly wage and tracking every penny into and out of your life.



* I make this comparison as an example only.  Janitors play an important role in keeping things working, and by no means did I make this example with the intention to demean them.

Part 1: Stock Option Results, Part 2: Podcast on the Subject of Gold

There is so much that I wanted to tell you today that I have split my Post up into two parts, and I am saving the remaining information for another time.

Part 1: Stock Option Results

The Put option that I sold on YUM a few weeks ago expired without me having to buy the stock.  The stock price did fall below $44 dollars for one day, before it increased to $45.75 on 09/17/2010 (Expiration Day).  I have not researched what I am going to invest in for this coming month.

As a reminder: All of my investment choices are shown on the "Stocks and Stock Options" page.

Part 2: Podcast on the Subject of Gold

This morning I heard the following segment on "The Bill Meyer Show", radio station KMED.  I thought it was good information to know, and decided to share it with you.  Gold and Silver have been on a tear upward in price the last few days, as have stocks, and I was not able to make sense of the reason until I heard this.

click below to hear the podcast
Bill's discussion with Andy Gause

My Stock Option Pick for September

I decided to sell one put this month.  My pick was YUM Sept 10 44 put.  The YUM ticker symbol stands for YUM! Brands, Inc.  This company operates other companies such as KFC, Taco Bell, Pizza Hut, etc.  I chose them because I think people will always eat inexpensive food, even during tough economic times.  I was able to sell the put for $0.59, for a profit of $0.59 x 100 shares = $59 (before fees are taken out).  After all of the fees from the broker were included it came to a grand total of $44.03 for this month.  The annual percentage rate for this is 12%.  If the stock goes below the strike price of $44, I may have to buy the stock at $44/share.  Today the stock closed at $44.28.

What sealed the deal for me was my husband recently spoke with a truck driver.  They started discussing how business was going for the driver.  The man told my husband that he chose to drive truck transporting food, as oppose to some other item, because people will always need food.  The driver stated that his work has cut back a little, but he is still busy.  He then told my husband that the guys that haul electronics are not doing as good. 

In the previous post, I wrote that I was considering investing in Honeywell International, Inc..  This is listed as an Aerospace/Defense company.  I decided not to invest with this company at this time because the stock options were not very profitable for me.   I only have around two weeks remaining in September before September stock options expire.  As time decreases on the options, they do not earn as much.

After reading the news this evening, I am glad I did not invest with Honeywell International, Inc..  The Huffington Post has an article written by Mike Elk titled Explosion Rocks Honeywell Uranium Facility Run by Scab Workers.  NOT GOOD!  Supposedly the explosion happened when they were splitting Hydrofluoric acid (HF) into Hydrogen and Fluoride.  HF is a nasty little acid. (MSDS)  As a little background, I have taken around four years of college chemistry.  If I remember correctly both Hydrogen and Fluoride are HIGHLY volatile.  It will be interesting to see what happens with the stock tomorrow.

Technical Analysis of Stocks and Gut Feelings

Currently, I am looking at various stocks to see which trade I am going to place next. I use technical analysis, the news, and my gut feelings when making a trade.

These are the stocks and industries that I have researched today, in no particular order:

Industry

• Gold; 
• stocks - MGH, VGZ, JAG, BRD, GG, NAK, RBY, and GGN

Industry

• Paper Products
• stocks - IP, XRM, BZ, and KMB

Industry

• Aerospace/Defense Products & Services
• stocks - HON and GR

A part of my investing is based on gut feelings.  This probably sounds unprofessional, but there is something to be said for the internal voice that is saying "go for it" or "run for the hills".   For me, it stems from the overall sentiment that I am getting from the news and the people that I am around.  There is this nervous energy that I pick up from people when the markets are about to turn for the worse, or an excitement that things are looking better when stocks are going up.  Instead of ignoring the internal voice, I listen to it and then back up my feeling with data.  My personal fear can mess with my gut feeling, so I look at the data in order to prevent fear from stopping me from progressing.

The definition of technical analysis as stated on http://www.investopedia.com/ is the following:

"A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity."

 Personally, I enjoy working with charts. It is a LOT of fun for me.  I explained a little bit about technical analysis on my Stocks and Stock Options page.  Our family uses software that allows us to play with stock charts.  This includes the ability to add trend lines, include different studies (examples are: MACD, Stochastic, Moving Average, etc.), and change between a line graph and a candlestick graph.  I do not have time in this post to explain this in detail, so if you are interested in learning more please look up the definitions on the Internet or in books.

What I am seeing in the charts today:

I saw several interesting things in the charts that lead me to think particular stocks are going to trend downward in the near future.  This follows information that I have been hearing in the news.  In particular, I chart Moving Averages for stocks at 30-days, 90-days, and 200-days.  What I am seeing is, on the daily graph, the 200-day line (green) is crossing above the 30-day and 90-day lines.  Along with this, the 30-day (red)  line is crossing below the other two.

IP stock has followed the pattern shown above.  I think it might have short little runs up, but over the next 6 months to a year the long term trend is down.  The stock price for the last 22 days has been below the 30 day MA (red line).  When the stock price consistently stays above the red line, and the red line crosses above the 90-day MA (blue line), then look for the longer trend to be up.

I am leaning towards trading HON stock. I like its dividend, and I recently read that it has signed an agreement with China to send them parts to make their own airplanes.  The article I read stated that China currently purchases its airplanes from Boeing, but they would like to be able to build their own.  This stock was also strong during the Great Depression.

When I finally decide what I am going to invest in I will display the information on the Stocks and Stock Options page.