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Compounding: You Don’t Understand It’s Power!

Saturday, June 12th, 2010

Compounding

We all think we understand that word, or do we?

In medicine, compounding can mean the process of making medications in the pharmacy with basic ingredients.  A lost art in this age of  prepacked pills.

Compounding also means making mistakes worse-we make a small error on top of another and in the end- a poor result is multiplied.  An example would be diabetics, who are also hypertensive.  Their morbidity, and mortality is not additive, it is multiplied!!

How can we use compounding to our advantage?

You have heard about compound interest, haven’t you?  JD Roth at Get Rich Slowly gives great examples of hw the advantage of compound interest can affect your savings, or retirement accounts.  He gives one example that shows the power of compounding:

Quoting JD-  “If Britney (age 20) makes $5,000 annual contributions to her Roth IRA, and she earns an 8% return, she’ll have $1,932,528.09 saved at retirement. But if she waits even five years, her annual contributions would have to increase to nearly $7,500 to save that same amount by age 65. And if she were to wait until she was my age, she’d have to contribute nearly $25,000 a year!”

Wow, what a difference a little consistency and time takes.

But what about compounding in your life, how does that work?

Darren Hardy (the publisher), in this months Success magazine has an article about the use of “compounding” in our life, in fact he has written a book about it.

But in this example, Hardy discusses the compound effect  small adjustments in your life can have over time.  He tells the story of a guy who cut 125 calories out of his diet every day, and walked 2 thousand steps (less than a mile).  In the first few months, no noticeable difference in his weight or appearance. But with consistency, and time-in 31 months, he lost 33 lbs.

Now compare this to his friend who added that much  125 calories-to his diet everyday by drinking a beer every night-he worked hard and deserved it.  Well-in 5 months-nothing much measurable happened, but by 36 months, he had gained 33 lbs.

Now you are thinking, “How can anyone diet for 36 months?”   Cutting out 125 calories is not a diet, that is cutting out the equivalent of a 16 oz soft drink, or 1/3 of a cinnamon bun/day- or one adult beverage.

But to be successful, you can’t replace that 125 calories in another part of your diet-by snacking more or eating more at another meal.

Compounding has tremendous power, whether in your financial life or your personal life and development.  Minor changes, whether it’s reading a blog like “The Millionaire Nurse Blog” every day, saving a little every day, cutting back on your eating-or exercising a little more are great examples.

All of these small changes, when magnified over your lifetime, can have dramatic changes in your health, your finances, or even your happiness.

Do you think-this money stuff is too hard to learn, so you  continue to do what you  have always done?

Let today be the day you get started with small changes.  Make a minor adjustment, even if it is just spending 15 minutes per day reading blogs or other  articles about money management.  Over time, you will know a thousand percent more about money and its management than you do today.

You and your family will be glad you did!!

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Posted in goal setting, personal finance | 6 Comments »

Priorities: Do We Put Our Time Where Our Mouth Is?

Friday, May 28th, 2010

What are your priorities?

What are the things that you think are important RIGHT NOW?

One way to judge this is by reviewing New Year’s resolutions-when we traditionally list the things that are most important to us.  Christion PF, a personal finance blog, reviewed the top ten list of New Year’s resolutions on January 4th this year.

It is interesting to note how many there were in the self-improvement category:

  • Lose weight
  • Get out of debt
  • Learn/keep- a budget
  • Start a business
  • Get more organized

I decided, for no reason in particular,  to see if we put our money (or time) where our mouth is…(actually it was this post by Len Penzo that triggered the idea-not sure why- as they are unrelated, but I will give credit where credit is due….)  Well, maybe not credit, Dave Ramsey would kill me if he thought I was giving credit…

I decided to see what the numbers were like-what we really do with our non-work time.

Television:  Do we use the television to assist us in the pursuit of the above noble goals of improving ourselves?

Well, no business or self-help shows made those lists.

Well, maybe the folks who are really dedicated to improving themselves are reading magazines instead:

Well if not magazines, maybe newspapers:  Aha, this list of most read newspapers has the Wall Street Journal as the most widely circulated. That can count as self-help, don’t you think?

Then, I had a revelation.  Young people these days are not reading newspapers, they are on the net. That is where all the folks live that are dedicated to improving their lives:

  • Top rated websites: check out this ranking from Alexa.  Sorry, not much in the improvement category here…. This list is dominated by Social Media-Facebook, Yahoo, and Twitter rule the roost.Of course Google is the King Rooster!!!!  Maybe Wikipedia counts as a self-improvement site.   But a couple of porn sites are right in there with Wiki…..(no I didn’t link to the porn sites-though it would probably improve my Alexa ranking…)

Nobody reads books anymore, so I didn’t bother with the Amazon best-sellers. Although I know the top selling books were not  dedicated to self-improvement.  They are dominated by teenage vampire stories, and romance novels…..

Just for fun, I did try to find out the most popular business websites:  Check out this list. Now here are some big numbers:

  1. Yahoo Finance: 35 million page views per month
  2. CNN/Money: 34 million
  3. WSJ: 23 million

So here is where everyone is  going for education I thought.  Till I remembered the numbers for TV were for one program (20 million per prime time episode).  Multiply that for a month (let’s say 20 prime time episodes per month- that makes 400 million viewers of prime time TV just for one channel) and Yahoo finance looks pretty lonely at a measly 34 mil/month…..

Does it surprise me that people’s self-improvement desires have absolutely nothing to do with their leisure activities?

Of Course Not!   The Road To Hell is Paved With Good Intentions……as they say.

Do I think you would be better served by reading books on improving your life rather than watching “Lost” or /”24″.  Yep!

But, I look at it as a challenge.  My job is to make this blog so interesting, people will choose to read it instead of reading the latest Lindsey Lohan story.  And Oprah is leaving, so there is an opening.

But maybe I will start putting a few nude pics here, for scientific study and artistic value, only, of course….

Reader comments:

Do you have any thoughts on why we  say we want to improve ourselves, but don’t bother trying?  What do you think would help motivate,  and stimulate others  to act on their self-help desires?

Change of Shift, a great collection of Nursing Blog’s best posts is up at “The Makings of a Nurse“-check it out, and tell her Dr Dean sent you…

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Posted in goal setting | 3 Comments »

Finances Need a Fix? “Retreat” May be Better Than “Charge”!

Friday, March 26th, 2010

Are your finances broken or in need a repair.  Maybe you need to get out of debt or can’t figure out how to save money-even though everyone is telling you-”save for retirement-your next car, college, new home….”

I think you get the drift.

So what do you do to get started????

As many of my regular readers know, I am an elected city council member.  We are at a city retreat today.  Finishing up a day and a half of planning for the future.  I find these meetings extremely effective in getting our city moving, in what the council and mayor thinks, is the right direction.  We come up with milestones, or parameters to make sure our direction is being followed….

So what does this have to do with managing your finances?

Well the problem with most household finances, is that nobody is thinking about next week,   next month or the next five years.

So what do you do?

Have your own retreat.

Cardinal Flower or Lobelia Cardinalis Found on our city's Nature Trail

Set aside time for you and your spouse.  No distractions allowed.  No kids, cellphones, televisions.

Personal Finance Retreat Agenda:

  • Where are you now?  In debt, drowning in bills, not being able to give to others?  Make sure you do a personal financial statement before the meeting.  Here is a link to my website where you can download a simple template of a financial intake assessment.
  • Set goals for your family, both financial and personal-remember many personal goals affect your finances-do you want to save for college, save for a new house, save so you can give to the hungry in Africa, or your church?????
  • Set a timetable for  your new goals.
  • Set a spending/saving  plan to match your goals.
  • Make as much of this become automatic-using technology and planning, so you don’t have to think about it.
  • Revisit your goals on a schedule-have a mini-retreat every three months.

Now you may say, we can’t agree on what to have for dinner at our house, how are we going to agree on our goals and plans.

Well, our council is made up a diverse group of economic, religious, and racial backgrounds.  But our common bond is that we genuinely love our city, and want to make it better for our children and grandchildren.

Does that mean we agree-far from it.  We have lively debates on the best way to spend the limited tax dollars that are becoming more and more precious every day.

So you and your family, at least the ones old enough to have a say, (which means they bring in money, or work in other ways to help the household), need to come to a consensus.

If you can’t come up with reasonable compromises-maybe you have someone who is addicted to spending, an alcoholic or drug addict-then you may need marital, or other counseling,  to help with those all too real issues.

So go have your own retreat.  Make a few tough decisions about your spending….

You will be glad you did!

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Posted in Personal Finance 101, Uncategorized, goal setting | 2 Comments »

Goals and Plans For Millionaire Nurse Success!

Friday, January 29th, 2010

Goal setting and planning are the foundation of becoming successful with your money management.

I am headed to a retreat today, focused on my medical practice to set goals, and plan for the next 5 years.

Making long range goals, then short term action steps to support those goals, is the key to managing your money.  So, you and your spouse, need to set aside a time soon, to plan.  Schedule a time, block out a few hours, get a baby sitter.   Turn off the TV, cell phone-get rid of all distractions.   Use a pad or even a white-board and put your dreams and aspirations in black and white.  Review your financial situation, and what needs to happen with your money to support your goals.

If you want an advanced degree in nursing, plan your career around going back to school, begin to save the money for tuition or the decrease in income that will occur when you are taking classes.

Don’t just wake up one day-decide to go back to school-quit your job-borrow two gurneys full of money-and put your family in financial trouble, because you were too selfish, lazy, or stupid (use your own adjective)   to plan.

I will soon be introducing a template to help with goal setting and planning, to help families with this step.

So don’t let another day go by.  Stop what you are doing and make an appointment with yourself, and whoever else needs to be there.  Do a little thinking and brainstorming before that day comes and be prepared for negotiation.  Your plans have to mesh with your partners, if you are not single.  This can sometimes be difficult.  So be prepared to give a little.

If you can’t come to agreement on all items-save those for a later discussion, after each has had a chance to think it over.

And if you are single, all you have to do, is convince yourself-how easy is that!!!!

So, plan your own version of a retreat today.  Repeat it every year. Review your goals, and plans at least several times per year to make sure you are on track.

Good luck-and don’t bother trying to find me today-I an unavailable…..(yes- sometimes I follow my own advice!)

Let us hear your suggestions, and plans for goal setting.

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Saving Money-While Losing Weight and Getting Fit-Win/Win/Win!

Tuesday, January 19th, 2010

“How can you save money, get fit, and lose weight all at the same time, Dr Dean?”

“Well, I am glad you asked.”  Here are my rules, for “Millionaire Nurses”, who know the value of saving money,  good health and fitness.

  • Burn more calories:  Bike to work, walk to work, even if it is only once a week.  Same for shopping, park the car and walk to several of your destinations if possible.  If you have to drive, park as far away from your work as possible-(won’t save money, but will burn calories.)
  • Stop fast food-take healthy food for lunch.
  • Switch shopping time to exercise time.
  • Take advantage of health insurance/workplace incentives to lose weight and exercise-Some companies drop premiums, or even give cash bonuses if you meet certain measures of losing weight, stopping smoking, or exercising.
  • Cook at home-make it fun-turn the tv off, put on your apron with nothing underneath(keep it safe), turn up the music, use healthy ingredients, have your family help(with clothes underneath the apron if you have kids, please!)
  • Instead of date night out at the movies, or on the weekend-make it play time out-take a walk at a park, bike, build a snowman, cross-country ski.
  • Smaller food portions at meal times translates to lower grocery bills.
  • Skip desserts at home and when eating out.
  • Take showers together with your spouse-(if you don’t know how this can lead to burning extra calories, then we need to talk.)
  • Stop buying pre-packaged, high sodium/preservative sandwich meat.  Buy a chicken breast/bake or grill/cut on the diagonal for sandwich size portions-you can do the same with pork-loin, or inexpensive roasts.   If you have too much to use in a couple of days, freeze them, labeled with date and identity, in sandwich size freezer bags.
  • When buying exercise equipment, buy used on Craig’s list or E-bay.
  • When joining a gym, watch for special rates, ask for friend referral coupons, and make sure you have a way to cancel your membership without penalty!
  • Switch to whole grain cereals or oatmeal-buy in bulk/add low-fat milk, fruit instead of cereal bars, or skipping breakfast.

What are your favorite ways to save money while losing weight and getting fit?  Let us know your tips.

And to get you started, here is a link to a 2 bucks off for Soy milk by 8th Continental-I love the stuff! And it’s healthy too.

And if you need “Emergency Money Resuscitation” then go pick up my free E-book, filled with money-saving tips-did I say free.  You will then receive my e-mail mini-course on personal finance, and newsletter- all free.

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"PAD" Your Savings: It Should be "Planned, Automatic and Done!"

Monday, January 18th, 2010

Saving money, is not done just for the sake of saving.  To be most successful, develop a goal and plan.

In medicine we develop a treatment plan or guide.   If the diagnosis is heart failure  then doing a chest x-ray, blood gas, give diuretics and so on…..,

As circumstances and facts change, then adjust the treatment plan.

What happens in cases where there is no plan? Here is an example:

You have three doc’s consulting on the case, they all write conflicting orders, the nurses have no idea who is in charge.  At best, the remarkable being that made the human body comes through and the patient gets well anyway.  At worst, an injury or event occurs that slows down  progress-drug- drug interaction, allergy, or infection occurs. Frugal lawyers get involved….Makes me shudder to think about it.

So how does that compare to your personal finance and savings.  Those that have a plan, and direction will always win.  Doesn’t mean bumps in the road don’t occur, but you have plans in place to deal with them.

So what do I want you to do about the Savings part of your personal finances:

  1. Determine what your savings needs are-home down payment, car upgrade, new tires,  or retirement.
  2. Make sure your emergency fund is in place. See this post about my recommended Super-Duper Emergency Fund.
  3. Once you determine the need then decide on how fast you can meet the goal-10 bucks a week or 100 bucks a month.
  4. Make your savings automatic: your 401-k is usually painless, because it comes out without your thinking about it.  So do the same with all your savings-have the amounts you choose drafted right after you get paid, to the right accounts or sub accounts.
  5. Review every three months for adjustments.  If you gradually increase your savings rate, it is much easier to reach goals, without everyone in the family having a heart attack-”What do you mean, I can’t go to Old Navy this weekend?”

So go “PAD” your savings-”Planned, Automatic, and Done!”

Housekeeping:

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What are You Changing? Saving More in 2010!

Monday, January 4th, 2010

Happy New Year!  I hope everyone enjoyed the holiday safely.  Monday will bring back a full week of work for most of us.  And looks like global warming is slamming us here in the south with another record cold wave.

An interesting poll done by Putnam Investments was released a couple of weeks ago.  You can read an article about it at this link.

In this poll of 1000 investors online, they found the number one goal for the new year,wasn’t weight loss, but to SAVE MORE MONEY in 2010.

They also said their number one concern for the next year was job growth, followed by economic growth, not health care reform, or global warming.  And finally, only 38% felt the feds stimulus was likely to help them this year.

Now I think these are very realistic assessments.  The most important thing now, as we have stressed in other posts, is execution of these great sentiments.

So what do you do now?

  • Increase your savings from your paycheck automatically-study your planned spending and decide how much to automatically shift to a savings account, out of your paycheck each month.  Maybe it’s 10 dollars, or maybe its 100, but just do it.
  • Increase the amount deposited in your 401-k or IRA out of each check.   Again, set it up to happen automatically-you don’t want to have to remember to transfer the money yourself-temptation to spend is great.
  • If you think your job is in danger, increase your emergency savings fund, to allow you to get by while you look for new work, if you do get laid off.
  • Decrease your monthly expenses-study your bills and find ways to save.
  • If you get a raise, work overtime, or get other unexpected  earnings-have a plan to save either all or a set percentage.
  • If you screwed up, and put a lot of Christmas on a credit card, then start now, to save money to pay it off as quickly as possible.  Have a yard sell, take clothes to consignment, take extra hours at work.   Make a concentrated effort to knock it out now, before  you get used to seeing that balance on your card statement.

So, what are your plans and worries for 2010?  With better planning, you can get rid of the worries.

So stay warm, and if you get snowed/ iced in spend a little of your time, talking and planning with your spouse, studying your financial situation, and let’s make this a GREAT year!

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Things To Do This Week: Review of Previous Posts, Not To Be Missed For You Millionaire Nurses!

Tuesday, December 29th, 2009

With the time here between Christmas and New Years, when many people are off work-it is a good time to do a little planning and review.

You can’t make progress unless you know where you have been, what your mistakes and successes are, and a plan and goals for the future.

Bloggers frequently lament that their best writing and posts are often written early in their blogging days, when few are reading.

Because no one knows about their great blog, and wonderful writing found there.  I am not so bold to call my writing great, but I have been lucky to have added a lot of new readers since the meager beginnings of The Millionaire Nurse Blog.

So I want to take a few minutes to review a few posts that you need to read and act on before year’s end-that you may have missed.

And if you are one of those loyal readers, who have read every post, I want to take the time to thank you and bear with me.

First, if you want to know twelve ways NOT to become a  Millionaire Nurse, go here.

For a post  about goal setting and planning, check out this one.

For a few things that are really important to get started on here at the end of the year, check out this post on doing your financial statement, and this recent, but very important list of  financial things you need to work on at year’s end.

And finally, in this walk down memory lane, is this post on getting excited about your finances.  The only way to change behavior, and make progress towards your financial goals is to develop hope, and passion for your financial future.

So review these posts, and let me hear your comments and questions.

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Top Ten List: The Things Millionaire Nurses Need to do Before January 1!

Wednesday, December 16th, 2009

January 1 is fast approaching.  The charge nurse is busy fighting over who works Christmas eve/day and New Years eve/day.   Nursing students are finishing exams.  I have seen exciting post’s on Facebook about graduating!!!! Yeaaaa-but now the clock starts ticking on student loans, doesn’t it???

Sorry,  like that new admission you always get, 10 minutes before change of shift, sometimes bad things happen to good people, but we gonna be real here.

So in honor of Dave Letterman, (or should it be dishonor) here are the top ten things you need to do before the first of January:

  1. Set a time for your goals and planning-then do it.  Click the links here for earlier posts on goals.
  2. Check your free credit report at Annual Credit Report here.  Study it for inaccuracies.
  3. Do a financial statement of net worth.
  4. Review/do a budget, if you don’t have one.
  5. Find out the amount of interest on loans you paid this year, if you don’t know how, see this post.
  6. Buy term life insurance or make arrangements to do so, if you already have life insurance,- make sure the beneficiaries are correct.
  7. Make sure your will, and health care power of attorney are up to date.  Check out this post for a kit to help.
  8. Get your end of year tax documents together-get that folder now,ready for the statements, W-2′s etc you or your accountant will need.
  9. Meet/call your accountant to make sure you don’t need to change withholding, 401-k amount, and whether any of the new tax changes will affect you next year.  If you don’t have an accountant, you can run the numbers on your taxes/talk with your personnel department regarding the withholding.
  10. Review all of your bills/services to see if you can drop your monthly payments-such as car insurance, cable, internet, cell-phone.  Make a list and schedule calls, do comparison shopping to drop your bills.  Negotiate-see this post by Ramit Sethi on negotiating.  Use this technique to negotiate your cable bill, phone bill and when your are shopping, especially at stores that you are dealing with the owner.  And certainly, when you go for your year end salary and performance review, these are great things to know.

For a great accountability exercise, print this out and check things off, similar to the post made at 2 Dog Casa, with my previous post on Twelve Ways Not to be a Millionaire Nurse.

So take some time, when you finish your shopping, gift giving, partying, and eating, to look after your important financial affairs before the end of the year. If you cannot get them all done, look at your calendar, and write deadlines for each one today, that means today, before the day is over….

PS:

Housekeeping:

For my free E-book, “Emergency Money Resuscitation” click here or on the right middle, yes I said free.

For email notification of new posts-see bottom right.

For your feed reading pleasure-see the top right.

Please comment if you have questions or suggestions-thanks.

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Posted in Quality of Life, goal setting, personal finance | 2 Comments »

Get Excited!

Monday, December 14th, 2009

To make significant change in your financial life, you need to get excited.

  • Get excited about being able to pay your bills without worrying about finance charges, bounced checks, or when you get paid again.
  • Get excited about the giving you will be able to do when you have your bills under control.
  • Get excited about a great vacation, paid for before you leave town.
  • Get excited about the legacy you will leave your children when they understand money without going through the pain you went through.
  • Get excited about the joy your job will bring, when you are doing it because you enjoy it, and not for the paycheck.
  • Get excited about teaching others about their money.
  • Get excited about spending less, enjoying your friends, not stuff!
  • Get excited about tomorrow.
  • Get excited about………..

Your next step is to fill in the blank on that last statement.  What will it take to get you excited to learn/study/deal with your poor money management habits, and make changes, REAL CHANGES, not New Year’s Resolutions-forgotten the moment they were uttered.  Why is “passion” the most common word in romance novel’s titles?  Passion sells. That is what “The Millionaire Nurse” is doing, making real changes, getting excited and passionate about the future.  Join “The Millionaire Nurse’s journey!

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Posted in Uncategorized, goal setting, personal finance | 2 Comments »

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