How To Save Lots of $$$ Without Changing Your Lifestyle

Focus on the Big Wins

One the main themes in Ramit Sethi’s popular blog “I Will Teach You To Be Rich” is the idea that you should focus on the big wins. In personal finance, that means that you’ll save the most money by cutting back on a few big expenses rather than trying to penny-pinch every step of the way.

For example, Ramit talks about how some of his readers saved hundreds of dollars each year just by switching to a low-cost brokerage account and finding the best credit cards. Check your credit card statement for monthly charges – chances are you’ll find some subscriptions (a gym membership or a credit report service) that you never use. Cut those costs first! These are “high-return” situations  – they take very little time, save you lots of money, and best of all don’t require any change in your lifestyle.

Another great option is the daily deal sites. There’s nothing wrong with going out to eat or treating yourself to a weekend getaway. But why pay full price if you don’t have to?

It’s just another application of the 80-20 rule: 80% of your gains come from 20% of the effort. The trick is to identify that 20% quickly and maximize those particular opportunities – both in personal finance and in life.

Interestingly enough, many people who claim to be frugal are in fact “penny-wise and pound-foolish.” They’ll try to save $2 on coupons, but will pay massive annual fees on credit cards and subscriptions that they never use. Don’t become one of these people! Figure out how much you can save upfront with just a few big wins. You’ll be surprised at how big a difference it can make.

Don’t Overcommit Without Knowing What You’re Getting

A couple of years ago, I was looking to hire an SEO (search engine optimization) company for one of my web projects. I interviewed a bunch of candidates and finally narrowed in on one company. Everything seemed to check out: great references, terrific work history…and the guy I talked to was really friendly.

Eventually, we started talking about price. He gave me two options – a monthly fee, or a larger upfront fee that would guarantee me services for one year. I did the math and realized that I’d be saving a bunch of money by paying upfront, but I was still a little concerned.

When the guy saw that I was interested in paying upfront, he went in for the kill. “Listen sir, I promise that you will get outstanding quality service here. We know that our fees are expensive, but the one year option will definitely make things more affordable.”

I was sold.

Fast forward a few months. The SEO company was a total disaster. They weren’t delivering the results that I had wanted and they were incredibly unresponsive. I was getting angrier and angrier, and demanded my money back. Of course, they refused. After all, there wasn’t a whole lot I could do about it.

It was my own fault. I had overcommitted. I had gotten carried away in the moment, and wrote a large check without knowing all the facts. Had I gone with the monthly plan, I could have cancelled at anytime. This would have motivated them to keep working hard. But by giving them the money upfront, I ended up getting sucked into a major black hole.

This actually brings me the final point: if you’re going to hire people….

Hire On A Contract Basis

Anyone who’s ever had to make a hiring decision knows how hard it is to make the right choice. In a tough economy, every job listing gets hundreds of responses. It’s fairly easy to whittle the list down to a few qualified candidates, but how do you make the right decision? After all, some people might be great during an interview but won’t be the best performers on the job.

The new contract economy provides an effective solution. As the job market gets more competitive, qualified applicants are more willing to accept paid contract work that could potentially lead to full-time employment in the future. By hiring someone as a contractor first, you can quickly and cheaply find out if they fit the needs of your organization.

The contract economy is a boon for cash-strapped startups. Around Silicon Valley, many startups hire new employees on a three-month contract to see what they are capable of accomplishing. After the three month period, the startup and contractor can decide to extend the contract or part ways.

For example, ODesk, a leading internet network of contract employees, actually uses its own technology to hire contractors for technical copywriting, customer support, and server maintenance. This allows ODesk to identify the best people quickly while keeping costs low.

But contract employment isn’t just a win for the employer. By having a chance to evaluate the company while getting paid, the contractor can also see if the job is a good fit. The short-term nature of the contract also allows employees to keep their options open and look for opportunities elsewhere if they realize the job isn’t a good fit.

My own story – A few years back, I accepted a contract role with a startup in the Bay Area. It was a short-term deal with the possibility for full-time employment if things went well. Although I really enjoyed working with the management team, I just wasn’t that passionate about the product. A few months later, one of the senior executives asked me if I would like to join full-time. I said no – I’d thought about it a lot and decided that this just wasn’t the best opportunity for me. We parted ways on good terms.

This was a good decision for both parties – the company hired another contractor (who ended up being a better fit), and I moved onto projects about which I was far more passionate. I had also made some money and some great connections, while providing much-needed business development skills to the company. Overall, a win-win that wouldn’t have been achieved through a full-time hire.

What are some ways that you’ve achieved savings without changing your lifestyle?

Eight Small Steps to Move Outside Your Comfort Zone

A few weeks ago, I was at a conference when I struck up a conversation with an older businessman. As we talked about the economy, I mentioned how it was really important for people to constantly adapt in an ever-changing world.

The businessman turned to me with a surprised look. “I’ve been with my wife for forty years, and I’ve worked at my company for the same amount of time. I know just about everything there is to know about what’s important in my life. I don’t really think stepping out of my comfort zone will teach me anything new that actually matters.”

I disagree. The world around you is always changing. People change. Businesses change. What helps people make more money and lead better lives is their ability to discover and adapt to these changes. To do this, you need to step outside your comfort zone.

It isn’t easy – after all, we’re creatures of habit. We don’t like change. With that in mind, let’s start small. Here are eight baby steps to help you move out your comfort zone.

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Stop Making Excuses and Just Go For It!

“I don’t feel like going running today…I’m too tired.”

“I can’t believe that Jessie made so much money on his last company. I am way smarter.”

“She’s so annoying…I can’t believe she said that to me. If I had my way, I’d give her a piece of my mind.”

We all make excuses. It’s a natural way to let out our frustration once in a while. The problem is when it becomes a habit.

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Lose the Jerks

I recently got this e-mail from a good friend:

“Hi Vik. I need a bit of advice. I have this co-worker who is a total jerk. He keeps bad-mouthing me and generally gets in the way of my productivity. I’ve made some efforts to fix the situation; after all we’re supposed to be helping each other, but nothing works. What should I do?”

I like to think that most people are nice and generally mean well. But every once in a while, you get someone in your life who is a real jerk, someone that you just can’t deal with. This could be a boss, a co-worker, or an acquaintance. Most people reason that this is part of life – they just have to put up with certain people.

My approach is different: Lose the Jerks

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Crawl Before Walking, Walk Before Running

A few years ago, a good friend of mine set a New Year’s resolution of getting in shape. He was planning to hit the gym at least five times a week. On January 1st he went to the gym and worked out hard for two hours.

The next day he was extremely sore, but he insisted on “pushing through the pain.” He went in for another two hours…and ended up pulling his hamstring muscle. He was sidelined for a few weeks, and he never really gave the gym another try.

It was really too bad. He genuinely wanted to get in shape, but the immediate setback really dampened his enthusiasm.

A better approach is to take baby steps: crawl before you walk, and walk before you run. If you haven’t been to the gym in awhile, don’t try to push yourself too hard on the first day. Ease yourself into a routine; do a little bit each day. Over time, your body will get more used to the workout and you’ll be able to step things up a notch. This way, you’ll minimize the chance of injury and maximize your chances of success.

Of course, getting into a good workout rhythm is different from expanding your network and personal brand. These goals are even 

more long-term, and it’s important to constantly be taking little steps in the right direction.

Spend time with a different group of people: Once a month, try to make some new friends. Find people who are outside of your immediate social circle and call them up for lunch. The best part about this is you may even make some amazing relationships or business connections.

Try a different job function: Most people are very good (and are comfortable doing) one or two job functions. See if you can get an opportunity to try something new. For example, if you are an engineer, you might ask to go on a sales call to help explain the more technical aspects of your product. You’ll build confidence and you’ll develop some new skills along the way. As a bonus, your boss will probably like the extra initiative.

When in doubt, just ask yourself “what’s the worst that could happen?” You’ll be amazed at how a little perspective will help you feel more comfortable.

Stop procrastinating: There are two reasons we procrastinate – laziness and fear. Remember that if you are scared of something, putting it off isn’t going to solve the problem. In fact, the stress will only build up over time.

Instead, just do it! Tackle the tough stuff first and get it out of the way. This will relieve your mind of the stress of waiting for something bad to happen.

Over time, you’ll feel more and more confident, and can start taking larger steps. This positive loop will eventually produce big results.

Just remember, any step, no matter how small, is better than doing nothing at all.

The Secret To Maximizing Your True Net Worth

It’s so easy to get comfortable in life. We start out all excited about our relationships and careers. We’re willing to work hard to learn about the other person and develop our skills.

Fast forward five years. We’re set in our ways. Somewhere along the journey, we stopped learning and growing.

How do you fight this complacency? Here’s one trick I use: every so often, take a moment to think about your “True Net Worth.”

Your True Net Worth is what you have left when you strip everything else away – all of your relationships, all of your money and assets. You’re back to ground zero. It’s hard to imagine, but when you take away all the fancy trappings, this is who you are as a person – personality, skills, and enthusiasm.

So how do we boost our True Net Worth? Here are a few ideas:

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How To Build A Great Network

It’s great to meet people, especially successful ones who can help you. But meeting them isn’t enough…your goal should be to build a long-lasting relationship. That’s when you’ll really start getting some value out of your network.

Here are several things you can do to increase your chances of networking success:

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Four Experiments to Help Fight the Downward Spiral

Have you ever had one of those days where you just can’t seem to catch a break? Those days where you feel like you don’t have a purpose and that nothing really matters?

These are the days that can really hurt us. We might make a bad spending decision or say something inappropriate at work. The last thing we want is to damage our earning ability; this is only going to make things worse!

For me, the holiday season is a good time to reflect and figure out how I'm going to fight the downward spiral going forward. Here are four experiments I'm planning on trying next year.

Some people say that the goal should be to focus on positive thoughts. But that’s easier said than done; I don’t know about you, but positive thinking doesn’t come naturally to me when I’m feeling down. I started reading more about the issue and something interesting: it’s not about positive thinking, but instead about positive doing. Here are four ideas to help you turn things around.

Have Something to Look Forward To:

It is MUCH easier to get through the day when we have something to look forward to in the near future. Take a moment to think about the little things that are coming up – maybe a night out with your significant other, a friend’s birthday party, or a fun outing with your family.

What if nothing is coming up in your life? Well, then it’s time to change that! Figure out something that you want to do and make plans to do it. When I was younger, my father used to get energized by planning our family vacations. He worked hard in his day job and our vacations were only once a year, but just thinking about them made him happier and gave him much more energy.

Write About Your Loved Ones:

This is an interesting one. Researchers at the University of Arizona found a few volunteers that took time out of their day to write something about their loved ones. Immediately afterwards, they felt substantially uplifted. Once again, this experiment can make you feel like you have purpose, giving you an instant shot of self-esteem.

Do Something Nice For Someone Else:

Many people believe that we have evolved to be purely selfish creatures. Why should we go out of our way to do nice things for others without getting anything in return? But the research shows otherwise; volunteering time or money for the benefit of others makes us feel much better about ourselves. It gives us a greater sense of self-worth and boosts our confidence. I’m not saying to give away all of your time and money, but do what you can; a little goodness can go a long way.

Write Down Your Problems:

There was an interesting research study done a few years back. They did an experiment where people feeling down talked about their problems. Afterwards, the results showed that they didn’t feel any better. But when people wrote their problems down on people, they actually ended up in a much better mood. This is because writing things down helps put things in perspective. For some reason, your problems don’t seem as bad once you see them on paper.

Have a wonderful holiday season everyone! Here's to a happy new year!

Similarities Between Poker and Business

I’ve been an avid poker player for nearly 10 years now, and it always amazes me how many similarities there are between poker and business.

Many people dismiss poker as a game of luck. Nothing could be further from the truth. Sure, on a given night some people will get luckier than others, but I have yet to meet the poker player who consistently beats the odds just by running well. Over the long run, just as in business, those who are skilled, focused, and knowledgeable will always beat those who are just lucky.

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Are You A Pirate or An Architect?

There are two types of people in the business world: Pirates and Architects.

Architects add value to the world. They design valuable stuff. They create great businesses and build great teams. And they make lots of money.

The ultimate architect is Steve Jobs. He started Apple when he was just a kid, and took it from two kids in a garage to a multimillion dollar computer company. Then, he moved onto Pixar, creating animated movies that made millions of families happy and generated billions of dollars for shareholders. And in the last ten years, he has returned to Apple to execute one of the most amazing turnarounds in business history.

On the other hand, pirates aren’t as interested in making positive difference. Instead, they focus on capturing value for themselves. It sounds selfish, and it is, but here’s the thing: it works.

In the 1980s, a young pirate named Ron Perelman saw an opportunity to take over Revlon, the major cosmetics company. Perelman knew nothing about makeup, but he understood finance, and figured he could make a quick buck by buying the company, making some quick operational changes, and taking the company public.

With the help of his friend Michael Milken, Perelman successfully bought out Revlon. A few years later, he had personally made billions of dollars, making him the richest man in the world at the time.

This works on a smaller scale as well. I was recently talking to an entrepreneur who had personally made tens of millions of dollars investing in foreclosed homes. He was successful because he negotiated lucrative deals with desperate families, taking advantage of their tough financial situation to profit for himself.

I’m not saying that this is right or wrong. It’s simply a choice. Nevertheless, it amazes me that people can make so much money while contributing so little. Perelman was not a brilliant innovator, or even a world-class manager. He was simply an opportunistic businessman who knew how to play his cards right.

Even today, Perelman is more than twice as rich as Steve Jobs.

It got me thinking. For awhile, I believed that people who made the biggest contributions would be rewarded the most. Clearly, I was wrong.

So what actually matters? What is the secret sauce that made some of these pirates so successful?

As I read more about Perelman, I learnt a few interesting things about him…and about pirates in general.

First of all, pirates are amazing negotiators. They understand how to put themselves in the shoes of the other party. They have a deep understanding of any situation, and are constantly thinking about how they can turn it to their advantage.

Secondly, pirates are very impatient. This may seem like a weakness, but it’s actually an unusual strength. By being impatient, pirates are constantly motivated to maximize results.

Finally, pirates are extremely focused on making money. They view changing the world as a distraction, a side effect at best. It sounds cynical, and it is, but it’s this focus that allows them to beat out the competition.

It all depends on your goals. If money is really important to you, then being a pirate is the way to go. Find opportunities and squeeze the value from them. You will do well if you do it right, and honestly, it’s probably the easier road to wealth.

But if your goal is to make an impact, then consider being an architect. This is the only way to make the world a better place. It’s a tough path, but with hard work and a little luck, you can certainly be successful and significant at the same time.

Which are you, a pirate or an architect, and why?