Discover this One Technique that Will Help You Accomplish More…In Less Time

Man racing against time

Stop racing against the clock and get more done in less time by utilizing Parkinson’s Law

How would you like to get more work done in less time?

It seems like we always have so much to do, but so little time. In this article you will learn about Parkinson’s Law which will help you accomplish more in less time.

How this law helps you achieve financial freedom

We have a lot to do. We are working and hustling to get the next gig, pump out the next article, or write the next book.

As a result we never seem to have time.

Our work suffers, output drops, and we become burned out on the fringe of quitting.

We become stressed because we have allowed these tasks to take over your life. We resort to checking Facebook more frequently and binge watching Netflix.

This is where Parkinson’s Law will help you out. Once you understand this law you can use it to your advantage to do the work of two people in half the time.

What is Parkinson’s Law?

According to the Merriam-Webster Dictionary, Parkinson’s Law is a law that states “work expands so as to fill the time available for its completion.”

This Law was first mentioned by Cyril Northcote Parkinson in a humorous essay published in The Economist in 1955.

Parkinson developed this law over the course of his career working in the British Civil Service.

Parkinson theorized that people have a tendency to create more work for themselves because they have given themselves so much time to complete the task.

As a result they set long deadlines and work much less efficiently.

For example, let’s say you give someone ten hours to complete a task that would normally only take two. The chance of that person completing that task in exactly ten hours, no more, no less, are very high.

Even though the task only typically takes two hours, that person will find a way to make the task last the full ten hours you allotted it.

How can you use Parkinson’s Law in your favor?

Continue reading

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Free for Five Days: “Get Rid of Debt Forever: A Guide to Understanding and Conquering Debt”

I am making this post to inform you that my first eBook, “Get Rid of Debt Forever: A Guide to Understanding and Conquering Debt” is available for download on Amazon for free for the next five days.

From August 21, 2014 to August 25, 2014, you can have the book sent straight to your Kindle or any other device and it will be completely free. All you have to do is go Get Rid of Debt Forever: A Guide to Understanding and Conquering Debt and click download to have it sent to you today.

This book (along with other projects) has taken up quite a bit of my time. As a result, I have not been blogging as frequently as I would like, and I apologize for that.

But, I have learned a lot in this process and I want to use this blog post to discuss what you will find in my book, why I decided to create this book, and what I learned in the process.

What You Will Find

The eBook I created is a collection of blog posts that I have made on this site, along with a few added chapters not found here, organized and put into one place.

You see, I originally intended on creating a comprehensive guide on personal finance that would be found on this blog. I came up with this idea back in April and it seemed like a great idea at the time, but then I recognized something.

My realization

I realized that I was writing A LOT. And I was only writing on one individual topic which was debt. If I was going to create a comprehensive guide on personal finance, it would take a LONG time.

What I decided to do was repackage these blog posts on debt into an eBook. I was originally planning on giving this eBook away as an incentive for people to subscribe to the blog. Then I changed my mind and decided I wanted to publish it on Amazon, which I’ll get to in a minute.

So I decided to repackage the book, add some chapters and make it more organized, and edit it to make it a little less informal and free from error (at least that’s what I hope!).

Why Did I do This?

I mentioned above that I was going to give this book away as an email opt-in book. There are a couple big reasons why I wanted to publish my eBook on Amazon instead.

Reason #1: I wanted to create my own product

The first reason is quite simple. I wanted to create my own product that I could sell. I wanted a product that has my name on it that I could put out there for people to purchase.

At the end of the day, that is why we are here. I thought it would be great to repackage these posts, make them more organized and better written, and allow people to purchase my product.

What I hope is that people get some great value out of this eBook and that it will help them.

Also, I want to work on some advertising and marketing skills. By creating my OWN product to sell, I can create advertisements to sell something that can give me some sort of a return on investment.

In the process, I will sharpen my advertising skills which will help me dramatically in the future.

Reason #2: I wanted to learn the Kindle Direct Publishing platform

I plan on writing a lot more in the future. This will include many eBooks which I want to sell to help solve people’s problems.

For this reason, I want to learn the process of creating a book and putting it on the Kindle platform. I have learned A LOT in the process. Discover what I learned in the next section of this post.

For this reason, I figured I might as well learn this platform and process now so that I won’t have to face this learning curve in the future.

What Did I Learn From Writing this Book?

Writing is hard. Despite the fact that this is a short eBook, it was still a long process. Creating, editing, and now advertising has proven to be a challenging process.

When writing a book it would seem that writing should take up the most time. Not for me. The thing that took me the longest was the editing and formatting of this book.

It took a while to make sure everything sounded good and the format of the book was good for the Kindle platform. I went through a few rounds of editing with my girlfriend which took a little longer than I was hoping.

Also, creating the cover is another challenging process. Luckily for me, my girlfriend grew up doing graphic design and was able to help create a pretty good looking cover photo for my book.

Creating is fun. I love creating something and putting it out there for all to read. For me, writing is such a rewarding experience. So much that I plan on creating and releasing another book soon.

Staying balanced is hard. I have had to balance writing and editing with my full-time job, along with social media for this blog, blogging, and having a life.

As a result, my blog has suffered. I haven’t written a post in about a month here. It is difficult balancing all of these things but a lot of people do it and I’m not going to complain.

The Most Important Lesson of All

Even if I fail it is okay.

I would be perfectly fine if my book sales don’t take off. Obviously I’d be happier if I made a million sales of course, but if sales fall flat I won’t have any regrets.

What I have learned through this entire process is more valuable than anything. Even if I fail, no one can take away those skills I acquired and the knowledge that I obtained. These skills can transfer over to other areas in my life down the road.

On top of that, I have something to show for my time. Instead of wasting time on TV or fooling around, I have an actual product that I can point to and shows what I did.

Finally, if I didn’t try, I never would have learned anything new at all.

Takeaway

Writing a book is fun. I recommend anyone try it out. It’s not easy by any means and it takes time and it probably won’t be worth it money-wise. But the experience you gain will be completely worth it.

Once again, you can get my eBook “Get Rid of Debt Forever: A Guide to Understanding and Conquering Your Debt” completely free on Amazon for the next five days. Click the picture below to check it out!

I would love to hear your feedback, so if you could leave a review on Amazon I would greatly appreciate it!

Get Rid of Debt Cover

From August 21 to August 25 you can get your copy of my eBook completely free!

Should you pay off your mortgage or invest your money?

Suppose you win the lottery and you win just enough to pay off your mortgage. Should you pay off your mortgage? Or would you be better off investing that money?

In order to answer this question, we must weigh a number of factors. The most important factor deals with your risk profile. You will also want to consider how your current investments are allocated. There are numerous other factors that you must consider. Before we get to all of those factors, let’s make a few assumptions.

Let’s assume the following:

Yeah, I know the saying about people who assume. However, for purposes of answering this question in as full of detail as possible, I need to assume a few things before we dive in and discover my opinion to this question.

The following assumptions are being made:

  1. You have 25 years left on your mortgage so you have a long timeline left to pay it off.
  2. You are in the 25% federal tax bracket, and will remain there for the foreseeable future.
  3. In addition, your state income tax rate is 8%
  4. You current mortgage rate is on par with national averages at 4.5%
  5. You have $200,000 left on your mortgage
  6. You expect the average rate of return of the stock market to be 8% over the next 25 years.

With those assumptions being made, we have the foundation to truly evaluate what you should do with your lottery winnings: invest in the stock market or pay off your mortgage?

Tax deductions make your interest rate lower

The first item that you must consider is that your interest rate is really not the 4.5%. Why is this true? The United States has favorable tax deductions available to homeowners, so your actual interest rate will effectively be lower. What would be the effective interest rate based on our assumptions above?

Your effective interest rate after considering the mortgage tax deduction would actually be 3.105%. How did we arrive at that number? Using this handy calculator at Bankrate, you can easily calculate what your interest rate will be after your mortgage tax deduction.

Go ahead and play with the calculator a bit. It is interesting to see how much the mortgage tax deduction will actually help you. In this example it is almost like cutting 1.4% off your interest rate on your loan!

Paying off your mortgage means no mortgage tax deduction

Why is your interest rate important? This will help us in making our final decision whether to invest our money or pay off the mortgage.

If you choose to pay off your mortgage, you will no longer be eligible for the mortgage tax deduction. You will have to pay more in taxes as a result. But, you won’t be making mortgage payments anymore!

So it looks like a win for paying off you mortgage, doesn’t it? But wait, it can’t be that simple. Well…I guess we have to consider a few other factors before making our big decision.

The opportunity cost of paying off your mortgage

Paying off your mortgage would be a great relief. However, there is an opportunity cost to paying off your mortgage. Ah, opportunity cost, that word you used in economics and never thought you would see again.

By paying off your mortgage, you are foregoing other options with your lottery winnings. What specific opportunity costs can you think of by paying off your mortgage?

The biggest opportunity cost to me is that you will not have that money to invest. This is the biggest opportunity cost in my opinion, so hear me out.

By paying off your mortgage you are taking all of your money off the table to get rid of a huge debt, which can be a relief. However, you will not be able to do anything with that money once to pay off your mortgage.

This brings up an age old question: Should you invest or pay off your debt?

Generally, you would rather invest any extra money when you can achieve returns which are higher than the interest rate on your debts. For example, let’s say you have a loan with 2% interest. Let’s also say that you can make an investment which will return 5% in the next year.

If you choose to pay off your loan, the money will be gone for good. However, if you choose to go with the investment, your money will appreciate by 5%. Now you will have to pay 2% on your loan. As a result, you end up with a net positive return of 3%. Simple enough, right?

The answer is staring you right in the face

Let’s go back to our original example and decide whether you should pay off your mortgage or invest in the stock market.

Based on the assumptions being made, you will be able to achieve an average annual return of 8% in the stock market in the next 25 years. During that same time period, you will be paying an effective interest rate on your loan of 3.105%. You do the math. What will be your total net return of this decision?

Got your answer? Okay good.

I’m sure you answered 4.895% you smart cookie. For simplicity sake, let’s just say you will get an average net return of 4.9% if you decide to invest in the stock market and keep your mortgage as is.

This is precisely where I would stop and not even consider paying off the mortgage. I’m a numbers guy, and the numbers are telling me one thing: INVEST! However, I know that many people aren’t as into the numbers as I am, so I will lay out a few other factors that will help you make your decision.

Factor one: Your risk profile

Your decision will depend heavily on your risk profile. If you like to take on risks and live life on the edge, you would want to invest in the stock market regardless. You don’t care about the fluctuations of the markets, you live for this sort of thing!

Even if you have a moderate risk profile, you would likely opt to invest in the stock market as opposed to paying off your mortgage. Sure, paying off your mortgage would feel good, but you know there is a very good probability the market will return around 8% in 25 years’ time.

If you are extremely risk averse, you will take the sure thing and pay off your mortgage. What if the stock market crashes tomorrow and you lose all your money? You don’t want to take that risk no matter how unlikely it is. You want a sure thing, and the only sure thing is today. You would get rid of that mortgage.

Based on your risk portfolio, what would you do in this situation? Would having a shorter time horizon make you more likely to pay off your mortgage?

Factor two: Asset allocation

Another factor you have to consider is your asset allocation. This will depend on how many assets your had just before winning the lottery.

If you have very few investments, and you choose to pay off your mortgage, you are essentially putting all of your eggs in one back: real estate. This will throw your asset allocation all out of whack, and you will have a high risk exposure to the real estate market. This risk is even higher when you consider you are putting all of your money into one single asset: your home.

If you have few investments and choose to invest in the stock market, you are better able to spread your risk out among number companies, funds, and indexes.

However, if you already have many investments you would not be as impacted by choosing either option. We would assume that you already have a well-balanced profile. Paying off your mortgage wouldn’t expose you to asset allocation risk.

Factor three: Interest rates

In the example above, I illustrated that if you had a low interest rate you would be better off investing in the stock market. I did not consider the factor of higher interest rates.

The interest rate on your mortgage will affect whether or not you choose to invest your money or pay off your mortgage. Logic says the higher the interest rate on your mortgage, the better off you are to pay off the mortgage.

Other factors to consider

Psychological effect of paying off your mortgage early

Paying off your mortgage is a huge accomplishment. For many people, paying off debt is a rewarding experience. You will sleep better at night knowing that your will not have to make to monthly payments every month.

You will no longer have to worry about whether you will have enough money to make mortgage payments. The only payments you will have to make will be for insurance, property taxes, and any miscellaneous repairs and other expenses.

You will have excess cash to invest

While you won’t have the initial $200,000 to invest when you first pay off your mortgage, you will have an extra $1,000 to invest.

While you are deferring compounding interest on your investments, you will also be reducing your risk over time. Having this extra money each month will give you some flexibility for investing and give you extra cash flow every month.

Question to consider:

Would you borrow 3.1% to invest in the stock market?

Answer: for me the answer is a definitive yes. That is basically the decision you are making if you do decide to take your lottery winnings and invest them in the market (again, using our assumptions about market return made above).

What do you think you would do in this situation? Do you think you would pay off the mortgage or invest your money? What other things must you consider before making this decision?

Review of Rich Dad Poor Dad Part 2

This is my second part of a two part review of “Rich Dad Poor Dad”. In my prior post, I wrote about certain aspects that I did not like about the book. While that post may have sounded a bit critical, there were a number of things that I absolutely loved about the book.

The first thing that I really like was how simple he made investing by using accounting terminology. Basically every person has their assets and liabilities. Assets being things that you buy that will benefit you over the long run and liabilities being things that you buy that will cost you in the long run. He describes how many Americans don’t have any true assets. Assets will be things like those stocks and bonds and rental properties etc. On the flipside, many Americans have liabilities which they think are assets, the biggest one being a mortgage. Many people believe owning their own house is an asset but the truth is, many people can’t afford owning a house. As a result, they are forced to work in jobs they don’t enjoy to make money to pay for something they can’t afford. It may seem like a quirky concept, but I agree that owning your home can be a huge burden, especially if you are not adequately prepared.

Another thing that I enjoyed was the idea that you should mind you own business. When you receive you paycheck every week or two weeks, you really should be investing as much of it as you can. Don’t go out and spend every last dime you earned on a new TV or a car or other things that you don’t need. Invest in something that will generate long term cash flow for you so that you can get the most out of every dollar you earn.

I also agree with the idea that financial literacy  should be discussed in schools. High school kids really need at least one (or more) classes that teaches them about personal finance and how to invest their money. So many people these days are completely inept when it comes to saving money (a topic I will discuss in a later post). If people better understood how to save money and invest in themselves, we may not be in this financial crisis that we face today.

In addition, Kiyosaki says that they world is full of chicken little’s who believe that everything is going to crash down and the financial markets will collapse and never recover. I have encountered a number of people who have this belief and all I can do is shake my head. It is embarrassing that people are so naïve and really believe that putting cash under their mattress is better than investing it in the stock market. If you ever have any doubt about the stock market just remember, the average market return of stocks over the past two centuries has been 6.6%. Over those two centuries we have had two world wars, the civil war, a great depression and many other recessions to boot.

Overall I really enjoyed this book and would recommend it as a great book for those looking to learn about investing and personal finance. Robert Kiyosaki makes it seem very easy for anyone save up money, which it really is. It is not that hard to learn about investing. It is not that hard to save up a little bit here and there and invest it in assets.