Turns out I also needed to budget for Gatorade as well, but that’s later on in my story.

So they have talked me into giving this thing a shot.  I plunk down my cash for a pretty sweet folding bike, and honestly, I’m pretty excited about the whole thing.

Pretty slick looking bike, if I don’t say so myself.

Anyhow, my first time trying to ride the thing was going to work – ignoring the probably wise advice of one of my colleagues.  Suffice it to say, I didn’t make it – I got about 3 miles into the ride and had to turn around.  Yeah, I know, brilliant…right?

Second time out (last weekend) I just did a ride around Arlington that was about the same distance as my commute, and made it home without dying, so I decided that I would ride to work.  It took me a while, but I did make it, and I actually felt pretty good a few hours later.  My plan was to try to bus home, but I was feeling SO good that I said “heck, I might as well ride home.”  Talk about one of the most torturous things I’ve ever willingly subjected myself to, at least in a physical sense.  But I did make it, so there is a definite sense of accomplishment there.

This got me thinking, how could I apply this to my blog?  I guess you could make the argument that this is the same kind of short term pain, long term gain that most people have to deal with when handling their finances as well.  If you save a lot early on, you can kind of coast the rest of the way.  My biking coworkers assure me that the trek will get much easier if I keep it up.  Hopefully it will, because if it keeps killing me like it did earlier this week I won’t be able to keep it up for very long.

I’ve been spending a good amount of time talking about the wealthy part of the title to this blog.  We really haven’t been focusing too much on the happy part, which is something I hope to rectify over the coming weeks.  I guess the outstanding question we each have to answer for ourselves is what exactly in life it is that makes us happy.  Is it bad puns, like the title of this post?  Maybe you love running, or video games, or music.  I feel like it is almost imperative that we spend our lives figuring out what those things that make us happy are, and then shamelessly pursue them with little regard for anything else.  Have you found that one thing in your life that makes your heart skip beats?  If you have, please share it with the rest of us here, because I’m still looking for it.

Now, let me be clear, we aren’t talking about people here (unless you’ve decided that your thing is caring for others, if that’s the case more power to you).  We’re talking about those few topics that hold our attention long after others would have gotten bored and found another diversion.  Personally, I’m nearly that passionate about technology, but there are times when I have to set it down and pick up something else.  Those few people that I’ve met that have actually found ‘that thing’ rarely if ever feel the need to do that.  Charles Schultz said “I think I’ve discovered the secret of life — you just hang around until you get used to it.”  I hope that there’s more to things than just getting used to it.

So, our open question for the day is what is your thing?  And how did you find it?

The one upside to the whole situation is that it got me motivated to start selling stuff.  So I spent a few hours yesterday cleaning out my storage closet and figuring out what stuff I can sell.  I ended up listing three things on Ebay and three more things on craigslist (too big to ship) – not to mention I took the opportunity to list the tickets for the Penn State football games I’m not going to make it to this year.

The whole thing got me thinking – does all of this ’stuff’ I’ve acquired over the years really make me happy?  There are some things that I really enjoy – but a lot of it is just taking up room.  For example, I have a kitchen/dining room table that I may have eaten at five times since I bought it.  Really, it has just become the target location of my mail as I come through the door.

So I go through this semi-yearly purge of all the of things I don’t use anymore, and try to get a little bit of scratch for them.  The whole thing would be great if I were actually making money off this stuff, but I’m not.  I’m just averting a bit of the loss that I would incur if I just threw the crap out.

What do you do with your old stuff you don’t use anymore?  Do you donate it to your local charity?  Do you throw it out?  Have you tried getting rid of any of it on ebay or craigslist?  What have you decided was the best thing to do?  Other than maybe to stop buying crap you don’t need…

If you got the raise, or they are taking it to their manager, send your boss a thank you note.  It doesn’t have to be anything super formal, just an acknowledgment of  their willingness to be helpful.  Don’t send it for a few days, so they know you are sincere, but keep it short.  An email is fine.  I have gone with something like the following in the past:

Hey [insert manager's name here],

Thanks for taking the time out of your day on Monday to talk to me about my compensation.  I appreciate your willingness to [give me a raise, talk with your boss, whatever].

Talk to you soon,

Keith

If you need to follow up on something in a week, I’d write a line about that in the email too – that’s it.  Short, simple, and to the point.

What if your boss shut you down?  I would begin by still sending a note thanking them for their time.  It’s important to realize that there may be unspoken reasons as to why they were unable to help you.  I would also take any critiques from the meeting (if there were any) and work to resolve them.  At the same time, keep in mind that you will have to prove it to them at some point, so be proactive and find a way to document your improvement.  This way the next time your annual performance review comes up, you can be better able to respond.

If things went really poorly, or even if you just don’t feel like you are getting paid enough, now’s the time to start thinking about looking for a new job.  If you got a raise, even if it wasn’t what you were hoping for, you got a signal from your boss that they value you and would be open to increasing your compensation in the future.  But if all you got was negative feelings from the meeting, with nothing to hope for in the future, there’s no reason for you to stay.

Ask you boss (or your bosses boss, whomever it is you have the meeting with) what he or she can do to help you get the raise you want.  Be ready for some push back, but don’t expect it.  The fact is, everyone you work for has asked their boss for a raise at some point, and if they’ve been working for a while they probably have helped other employees get the raise they wanted as well.  The trick here is to make the conversation a collaboration, rather than an adversarial situation.  The other thing you need to do is get your boss invested in your success.

This is actually easier than it sounds – it’s all about the phrasing.  Remember that your boss is not the person paying you (unless he’s also the owner), so you aren’t actually taking money out of his pocket.  I’ve found that the usual progression of this stuff goes like this:

Keith: Hey John, how’s it going?

John (boss, not his real name): Pretty good Keith – you said you wanted to chat about your salary?

Keith: Yeah, I was hoping you’d be willing to help me get a raise.  How do you feel about that?

John: Well you know that I value the work you do for us, so I’ll see what I can do.  How much were you thinking?

Keith:  I’ve done some research and gotten an idea of what the going rate is for my position, but I thought I’d ask you what you thought would be reasonable and go from there since I know those numbers aren’t always accurate.  What do you think is reasonable?

John:  Well, I think I can get my boss to sign off on a $3500 raise, how does that sound?

(If whatever they offer you puts you in line with what you would ask for, thank your boss and get the heck out of there.  If it’s off by quite a bit, continue on)

Keith: It sounds good, but I was hoping for a number closer to $8000, based on my years of experience and the quality of my work. What do I need to do so you can get me that $8000 raise?

(That last question is key, because it shows you are willing to put forth some additional effort)

John: If I talk really fast, I might be able to convince my boss to move the raise up to $5000, but I doubt he’d be willing to go much further than that.  Let me see if he’d be agreeable to another salary review in about 6 months, but to get anything out of that he’ll probably insist on some help with one of his special projects.  Would you be willing to do that?

Keith: Absolutely!

Okay, so maybe you didn’t get the whole raise that you wanted, but you did get some of it, and a chance at more in relatively short order.  Then what?  Well, you have to close the deal – but more on that tomorrow.  Do you have any other tactics you’ve used to pull in a raise?

The first thing to do is figure out who you need to talk to about this.  In some cases, your direct manager has a great deal of influence over your salary, sometimes not.  If you think it’s someone other than your direct manager, pop in on your manager, let them know that you are about to ask for a raise, and then ask for their help getting you in to see the right person.  More importantly, ask them for advice on how to get what you want.  More likely than not, your immediate boss will have some inside track on how to do this whatever the ‘right’ way is considered to be at your particular company.  You can also ask them for their support during the discussion, either by going to bat for you with the manager that can make salary decisions, or some other way.  They’ll also hopefully be able to tell you if it’s a bad time to ask, and what would be a better time.  Take their lead on this, particularly if they are sympathetic and you feel like they will support you in this discussion.

If your direct manager is the one who sets your salary, you’ve probably got an easier time getting a raise than someone else might.  The best way to broach the topic with your manager will probably depend on the person, but I generally go with a short email like this.

Hi John,

Do you have 15 minutes later this week to do a quick review of my performance and perhaps discuss a salary bump?  I checked your calendar and it looks like you are available Wednesday at 3 and Thursday at 2:15.  Which time is better for you?

Thanks,

Keith

Yeah, that’s it.  I wouldn’t get into the nitty gritty over email, but I feel like it would be a really bad idea to catch your boss by surprise.  But you also want to add two possible times to add that extra bit of seriousness and give you a bit of control.  You don’t want the conversation to be right as the boss is running out the door on Friday or whatever other free minute they might have to spare.

Sounds simple, right?  It is, but that doesn’t necessarily make it easy.  Remember, you’re asking your boss for a favor, and in turn will hopefully get them invested in you as a person and not just as a producer of work.  The worst thing you could do is make this a you vs. your boss issue, because then you’ll never get what you want.  While your boss might have control over your salary, they will still have to jump through some hoops to get you a raise in most cases.  And they will probably still have to talk their boss into it as well.

The goal here isn’t what you might think though – we’re not hear to talk about how good you are at the job you have.  Rather, we want to collect two pieces of information:

1. Things you do better than anyone else they would hire to do the job
2. Proof that if they were to go out and find someone else, they’d have to pay them what you’re asking

Hopefully, your boss already likes you and knows that you are valuable to the team.  If not, instead of asking for a raise you might consider just going out and finding a new job.  Now, the idea isn’t to threaten your boss (actually, you want to get them invested in your success, but that’s a topic for another day), but rather to let them know that you are informed about the prospects for someone in your position, and to share that information with them in case they were not aware.  If the conversation goes well, you may not even need this info you are preparing, but it’s good to have because much like yesterday’s salary research, it will give you some additional confidence that you are worth it.

For part one, you need to be able to demonstrate a proficiency that lacks elsewhere on your team.  Maybe you’re not the highest producing developer on your team, but you’re the person the oil that greases the process for everyone else.  Or perhaps you’re the team member who sticks their neck out to deal with troublesome customers so issues don’t get escalated to management.  Or maybe you are the go-to guy when all hell breaks loose.  Your boss probably already knows what it is they hired you to do, so highlight those things that you do without even being asked.  And then write them down to bring with you to the meeting, because during stressful discussions like one regarding salary, it’s hard to remember some of these things.  For each of the things you do like this, write down a specific example that answers the who, what, and why.  Who did it impact?  What was the end result?  Why should your boss care?  Cover those three things and you’ll find it much easier to talk about with your boss.

The second part is a bit harder – you need to demonstrate to your manager that the salary you’re asking for is the going rate for someone with your skills and experience.  Print out some of those graphs and numbers on glassdoor.com and salary.com if you need.  Check out freelancer websites (if the work you do is also done by freelancers) and quote some of the rates they are asking for similar work.  This info you shouldn’t need at all during your meeting, unless the discussion starts to go in the direction of ‘other people would be willing to do it cheaper,’ but you should have it on hand none the less.  Comparisons (like what they do at stores when they have a sale – leaving the original price on the tag to make the product look like a good deal) can be very valuable as a selling tool, particularly if you decide to ask for a bit less than the going rate.

Now that you’ve done these two things, prepare the info in a way that you would feel comfortable handing it over to your boss.  Yes, for the most part they are you personal notes – but if your manager asks to see them, or wants you to forward them a copy after the meeting, you should be prepared to do so.  This will show that you’re serious, which can be to your advantage.

Tomorrow we’ll talk about how to start the discussion, and cover some tactics you can use to get them working for you rather than the company.

The first thing to figure out is how much your counterparts at other companies make doing a similar job.  You may think that your job is unique, but I assure you it isn’t.  The first thing to do, assuming you don’t know how much your coworkers make, is to hit up a site like salary.com or glassdoor.com.  If you’re at a smaller company, salary.com is probably a better resource, because it aggregates H.R. data from across the country to determine salary ranges for lots of different jobs.  If you work with a larger firm, glassdoor.com may actually offer you a window into what the salaries are of people in your current company that are doing your same job.  Either way, these numbers should only be used to give you a general idea of what you can get on the open market.

The second thing you should do is figure out if you are a top line employee, a bottom line employee, or a cost center.  A top line employee is someone who actively makes money for their company.  These people have the best chance of getting a raise because it is easy for them to quantify what having them does for the business, because they are bringing it in.  They may be salespeople, or they could be the one providing service to the customer (as in an industry like consulting).  Usually, these people can discuss raises with their bosses on a purely financial level. “I did $5,000,000 worth of business for the company last year and I feel like I deserve a bigger raise,” is something they might consider saying to their manager.

A bottom line employee is someone who saves the company money.  These people have a harder time getting a raise because it’s harder to quantify their value to the company, but it can be done.  These people might be administrative, finance, I.T., or any other of the support organizations within a company.  If they are lucky, these people can discuss raises on a financial level, but more commonly they can discuss raises based on performance.  “I saved your salespeople 200 man hours last year by implementing easier to use sales software and I feel like I deserve a bigger raise,” is something they might say during their salary review.

A cost center is an employee who costs the company money but is (hopefully) vital for some other reason.  These employees have the hardest time getting raises, because it is very difficult to quantify what they provide to the organization that someone else could not.  They might be janitors, office administrators, secretaries, or cafeteria workers.  Usually they are significantly separated from the company’s primary business.  Generally, these individuals can only discuss their personal performance, rather than their impact on others, during a salary review.  “I made sure there were always pencils in the supply cabinet and I feel like I deserve  a bigger raise” is something they might say during a salary review.

Okay, but here’s the kicker – any employee of a company can fall into more than one of those above slots.  A normally bottom line employee, when on a call to help one of the salespeople with their computer, might help that salesperson land a big deal.  It’s a big sliding scale.  Ideally, you should be able to determine your value to the company in monetary terms, but everyone should be able to figure out how much time they are saving the company.  Even a cost center employee could frame their job as a cost savings – without the janitor cleaning the bathroom stalls, more employees would get sick, which can be very costly for an organization.

The third thing you need to do is figure out exactly how much you are worth to the best of your ability.  This has two purposes – it gives you ammo for your inevitable discussion with your manager, and it adds to your confidence that you actually deserve this raise.  That is, assuming, that you determine you are as valuable as you think you are.  If something comes up short, I would suggest taking a step back and figuring out how to increase your value to the company before continuing down this path.

Tomorrow, we’ll talk about collecting more discrete performance data to be presented during your salary discussion.

1. Spend less than you earn
2. Earn more

Seriously, those are the only two things that you can do to be financially independent.  I’ve spent a bit of time talking about ways to increase your income outside of your primary career, but I think it’s time to discuss what might be called the dark side of ‘working for the man’ and talk some about asking for a raise.

Honestly, this topic is more complicated that you’d probably like – so this is going to be one of those mini-series like you see on TV, just hopefully with better acting (but probably not).  I have quite a number of thoughts on the topic, although I’ll be the first to admit I’m no expert even though I’ve had some success getting sizable raises in the past.

Starting tomorrow, I’m going to have a 5 day series around this topic.  Here’s what I plan to cover:

1. Figuring out what you are worth the company and how much your skills go for on the open job market
2. Collect info on what you do, how you’ve been performing, and how you’ve been making (or saving) the company money
3. Scheduling the meeting with your manager
4. Meeting Day – what to say and how to say it, the psychology of asking for a favor and getting your manager invested in your success
5. Following Up – What should you do next, and how to be prepared for the next time

Do you see anything I missed?  Let me know if there are other things you think I should be covering as well.

So, I’ve been thinking that maybe I should buy a bike and ride to work.  This isn’t completely crazy – Arlington is crisscrossed with bike trails that go most everywhere I might need to go, and the work commute most days is under ten miles.  I also have access to showering facilities once I arrive.  There’s only one problem – I don’t own a bike, and I’m remiss to purchase one that might get used a dozen times and then lie dormant in my closet for the rest of eternity.  I always loved biking places when I was a kid – it was the way to get around my neighborhood growing up.  But I really haven’t done much of it at all since I started driving, and that has me worried.

So, in true bWgH (okay, that’s a lame acronym, maybe I shouldn’t use that again) style, I decided to do a financial rundown of the cost benefit to buying a bike and how many times I’d have to ride it to and from work to make it cost effective.  I’ve got a few friends who are avid cyclists, and I’ve at least asked their opinions on this stuff, so my costs shouldn’t be out in left field.

Because of my limited space, I need a folding bike.  The only one I found that didn’t look ridiculous for a reasonable price was the Dahon Jack 7-speed – I can get it with a helmet from Performance Bicycle for ~$500.  And when it’s unfolded it looks like a normal bike.  I have been told that unlike when I was a kid, riding around on busy streets without a helmet is a bad idea, drivers don’t have much respect for cyclists.  I know I’m usually frustrated when I get stuck behind one, so I figure I’m being given good advice.  Over the course of the summer, I’d probably have to spend another $50 on maintenance (tubes and the like, I promise I won’t buy a little bell for it).

So let’s assume this whole experiment would cost me $550.  Not a drop in the bucket, but also not the most expensive thing I’ve ever bought.  Assuming I save about $5/day in gas and maintenance for my car, I would pretty much have to use it as my primary commuter vehicle for the next 5 months to be net even on the entire experiment.  Granted, I would also be great exercise, so maybe it’s not fair to judge it just through a financial light, but it’d making it hard to justify.  But it does alleviate some of the traffic problems I normally have to deal with in the mornings.

I could go cheaper if I had a place to keep the thing and could avoid the whole folding thing – if I just wanted to give this a shot maybe that would be the way to go.  I can also keep my eye on craigslist for something less expensive – as long as it’s in good shape, I could care less if it’s new.  Would you buy a bike just because you want to try riding it to work?

I’m thinking I might try out a MWF posting schedule and then double the length of the posts.  The additional time will give me the opportunity to intersperse some graphics and other stuff in the posts as well.  What do you think?  Is that the right way to go, or do you prefer the shorter, daily commentary?

If you can say yes to more than one of the above questions, you’re probably a frugal person, and your friends might think you’re cheap.  I make the differentiation in that cheap people will spend money on themselves but not on others, where frugal people just don’t like to spend more money than is necessary.  But whatever way you cut it, cheap people are pretty much never lazy people.

Think about it?  Being cheap almost requires you to do things the hard way – people pay for convenience, and if you’re cheap, you go out of your way to avoid those conveniences, much to the chagrin of those around you.

Okay, so you’re asking, why the heck am I writing about this?  Because cheap people are on to something.  I’m not saying you should start making poor man mocha’s to save yourself thirty cents – what I’m saying is that you should go out of your way to save money where it matters most.  Shopping for a new apartment is a great example – you could just sign the dotted line when you find a place you like.  Or, you could haggle with the landlord for a hour to save yourself $100/month.  Better yet, maybe you did some comparison shopping and saved yourself even more.

Call the cable company and ask for a discount.  Spend consciously, rather than having money leak out of your wallet.  Spend more time shopping around for larger purchases.  Yeah, it’s going to take you a bit more time than going the easy route, but learn something from your cheap brothers and sisters – sometimes taking the road less traveled will save you several hundred dollars that you didn’t need to spend.

But please, if I see you making the poor man’s mocha at your local coffee shop, particularly if you use up all the milk and there’s none left for the rest of us, prepare to get smacked around.

Okay, I admit it, the post assumes that you don’t have anyone paying you rent, and it also assumes you bought a house that was in livable condition.  However, since I have never been a landlord and I’m not all that handy with power tools, I think I’ll skip that discussion and just say that I’m not saying a house can’t be a good investment, just that renting isn’t throwing away money, and you can make out on top without ever buying a home.

All of that being said, I want to talk about something else we were chatting about at work – the fact that I buy sodas from the soda machine in the office.  First off, I guess there is a perception that because I write a financial blog, I think you shouldn’t buy stuff.  I buy stuff all the time and I have  a budget for it – at long as I’m not breaking that budget, I generally don’t worry about what I’m spending.  That being said, a point was made that I could bring soda into the office and probably save myself a ton of money over my current spending.

I have already cut out the coffee spending – I bought a pod coffee maker and threw it on my desk.  I even have something that makes pods for you that was given to me as a gift, although I will admit I have yet to use it (and the guys at work think it’s lame – that’s probably where they got the idea that I didn’t want to spend the money).  So it makes sense for me to bring soda into the office, right?

From a financial standpoint, definitely.  I’d probably save myself $2 a day if I stopped buying sodas out of the machine for a buck and a quarter.  What I’m worried about is that I’d end up drinking even more of it because it ended up being so convenient.  I already drastically cut back on how much of it I was buying for my house – if it’s not easy to get to, I don’t drink as much of it.

But let’s run the numbers – $2/day is about $10/week, or about $40/month.  That’s $480/year.  That’s not bad, but not a game-changer as to how much money is in the bank.  What I will say is if I were to cut out all spending during the work day, and bring everything from home, I’d probably save close to $8/day, or $160/month.  Now we’re talking about something that’s worth considering.  Because let’s be honest, the effort of bringing in drinks from home isn’t all that much lower than just making my lunch.

Now, the question I have for you is this – do you have the time and discipline to pack your own lunch everyday and bring it into the office?  I do, off and on, but I don’t seem to be able to keep up with it.  Maybe I should – anyone want to start a bring lunch from home club?

Financial Markets Explained by Dilbert

Scott Adams actually has an MBA from U.C. Berkley, so he’s far more qualified to give financial advice than I am.  Crazy…

A common theme through all of these discussions was renting vs. buying a home – more specifically, that renting an apartment was throwing away your money.  Of course, I took my usual stance that buying is not something that is going to get you ahead.  I talked about how it was 20% more expensive for me to buy than it was to rent, if you factor in maintenance costs on my home and all of the phantom costs.  But the conversation kept coming back to “I don’t want to keep throwing away money on rent.”

Rent is not a waste of money – particularly if you are getting a good deal on your property.  Rich people rent places all the time – it’s middle class, middle income people who are obsessed with home ownership, even if it doesn’t make good financial sense.  Renting is even less expensive when you consider the hassle and liabilities of home maintenance and repairs – I most certainly didn’t expect home ownership to have been as expensive as it has been.

The key to making renting work for you, rather than against you, is to have a concerted investment plan.  Figure out how much you could pay for a house – most people pay more for their homes than they would to rent the same size place.  Take that number and go apartment shopping – your goal is to find a place that is at least 10% less expensive than whatever that number ended up as.  If you can afford $1000/month in rent, find a place that you can rent for $900.  Then, take that extra $100 and invest it every month in an index fund (DOW, S&P 500, Russell 2000, take your pick – just make sure it’s an index that is diversified).  Do that for the next 20 years – more likely than not, you’ll end up on top.

Don’t believe me?  Dinkytown has a great calculator for running all sorts of different scenarios – I popped mine in and it turns out I am going to just about break even over twenty years.  And I bought relatively low.  People who bought at the top of the market are probably never going to recover.  If you’re someone who can leverage that tax credit from the government, you already have a sizable down payment, and you can buy a place you’ll be happy with for the amount you’re willing to spend you ‘might’ come out on top, so run the numbers.  But don’t forget to factor in things like your HOA fees and maintenance costs (the calculator has a section for that – I recommend adding 1/12 of your monthly payment to this field to cover maintenance, plus whatever fees you would have).

All of this is why I don’t think spending money on rent is throwing money in the trash.  What do you think – am I crazy?