2019 Resolutions and Personal Flexibility

‘Many of life’s failures are people who did not realise how close they were to success when they gave up.’ Thomas Edison

‘Fall seven times and stand up eight.’ Japanese proverb

‘Success is not final, failure is not final. It is the courage to continue that counts.’ Winston Churchill

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2018 is almost over. I hope it’s been a great year for you. For my part, it’s been a mixed bag.

With the new year about to start, is making some new year resolutions a good thing? And why do we make them?

I guess it’s inherently human to want to make a fresh start. To set a new goal. To look for some variety. To make an improvement.  Or do some self-development. Nothing wrong with that. Which of the following groups we fit into and the extent to which we move between them (at different points in our lives) is partly down to our Personal Flexibility (PFL).

Some people make resolutions the way they make a daily ‘to do’ list. Something to focus on and achieve, bit by bit. They are true believers and simply allocate their new year resolutions into their daily lists and get on with it. Some of this group are probably perfectionists as well as true believers.  Always chasing perfection.  But having to constantly redefine it too. Why? They realise that doing more things, or doing some things to a higher standard, isn’t the same thing as achieving perfection in everything.

Other people (I suspect the vast majority), make some new year resolutions, some of which are relatively quick & easy to achieve. With some of their other goals being are really difficult. Or requiring a lot of luck, outside the person’s direct control. 

People might join a gym, give up smoking, enrol in a course, or take up a new hobby. But their commitment to do the activity gets overtaken by other life events (and temptations), breaking the momentum. In this group, some learn to change the goals to ones that are more achievable and join the perfectionist/true believer group. Others learn to cope with mixed success, sometimes thriving on it (adventurers and managers are usually pragmatic people). They may become society’s leaders, because they succeed in the big things.  Yet small failure helps them stay grounded and accessible. Some become disillusioned and turn into non believers.

Finally, there are people who refuse to jump on the new year resolution band wagon – non believers from the start. The wagon moves forward and they stay in the field, watching it go. They may be perfectly happy and know what makes them happy. Like the seasons, they have a rhythm to their life.  And don’t need harsh judgement from the other groups.

In the end and in the round, it probably matters less which ‘resolutions group’ you fit into. But more, whether you live your own life according to a decent set of standards.

Happy New Year!

Simon

Making Judgements and Personal Flexibility

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A work colleague told me you shouldn’t judge people.  The trouble is, our economic, political and legal systems depend on someone judging something. Judgement of a chief exec’s ability to build customer support and create shareholder wealth. Voters on Election Day judging the government and its leader’s performance to date. Jurors deciding whether someone accused of a crime is guilty, beyond all reasonable doubt. We even make a safety judgement, when we let another person drive us somewhere in the car.

So if at times, we have to judge, does having more personal flexibility (PFL) make for better judgements? Ones that are fairer or more accurate?

Take a moment to think about how you make a judgement. Is it:

  1. First impressions rule ok.
  2. I’ll stay unconvinced until you prove it to me.
  3. I just don’t believe the so-called evidence you’re providing and serving up more of it won’t change my view (I suspect you’re lying).
  4. I’ll go with what I think is the most moral option.
  5. Which option will benefit me the most?
  6. Which option is the least risky?
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So how can Personal Flexibility help? One way is to select from a wider set to tools, on a case-by-case basis. In other words, don’t just apply one of the above approaches to all situations needing your judgement. In more other words, first judge which approach to use for the situation at hand. Maybe try making a second judgement (of the same situation) using one of the other approaches. See if you get the same result. If not, try adding a third approach and go with two out of three. If you face a really tricky situation, where you have to make a judgement call, apply all of the above, putting different weighting’s on the approaches if you have to. And add up the overall score (for or against).

Another way is to make a judgement. Observe the result with an open mind, And then change your judgement if need be. Changing your judgement isn’t weakness. Instead it’s evolution. Smart researchers who go on to develop wonder drugs, clever engineering solutions, or win Nobel prizes, aren’t afraid to evolve their theories if need be. Brave and respected politicians likewise.

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A further way to decide is the ‘Benjamin Franklin’ approach. Write down a list of pros and cons. Then go with the overall result, taking into account that some on the list might be significant and others minor (split each list into significant and minor items if need be).

If you find these blogs useful and meaningful, feel free to tell others.

Simon

Personal Flexibility and Time Management Revisited

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The Royal Trinity Hospice in London apparently has a motto ‘living every moment’. It’s a great one for terminally ill people, to make the most of the life they have left. Essentially it’s about enriching time.

If you’re pushed for time, try the technique of playing for time. Tell someone you can come up with a good answer or solution – perhaps better than they’re expecting. But you need another x hours to do so. This blogger has been in a couple of life-threatening, outdoor situations, slammed by multiple problems at once. Playing for time (the plan ‘B’), can literally save your life.

Staying in time (being a slave to the rhythm) can ease the burden. Especially if learning something new like; dancing, singing, swimming, marching, relay races or three-legged races in some parent-child, school event. Making love or debt repayments. Or following that car in front of your one.

Paying for time is a great solution for income-rich, time-poor people. Or those doing online grocery shopping because they don’t want to spend time driving to the store and shopping in person.

Making time and keeping time are like what you should do with promises. Choose carefully how to spend your allotted time (and choose your promises carefully too, preferably under-promise and over-deliver). Keep track of whether the time (and effort) invested is paying off in some way for you. We don’t have to charge for our time. But it’s ok to have expectations.  That in return for your valuable time, something positive should result.

Leveraging time is about reaping multiple benefits from one action. Lazy people love it.

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Use your daily work commute productively, not simply as an entertainment opportunity. Let your car’s onboard computers automatically handle more support aspects of your driving experience. So you can have a rewarding conversation with passengers instead.

Juggling time (or thin-slicing your time) is about juggling lots of loose ends, when you face delays and lead times. This blogger was recently given the job at work of setting up a new office in a foreign (non English speaking) country in Europe. As you can imagine, loads of signed form originals and ID documents were required, all referring to each other. Since you can’t complete any one aspect in its entirety, juggle the steps in the various processes concurrently instead. It is effectively filling in the waiting time with productive work. Accept that progress is uneven and therefore do planning ahead of time. And fact-find in the quiet times.

As always, if you find these blogs inspiring or thought provoking, spread the word for others to benefit too.

Simon

Networks and Personal Flexibility

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Just as individuals at work make up teams, who make up organisations, so individual family members make up nuclear families who are part of wider family groupings too. Individuals also form networks with their friends, work colleagues and various online communities of interest in the wider world.

Each interaction the individual has may vary in; the length of the exchange, its style (level of structure, informality and language used). And in the baggage that comes with each communication. Is there a long history of frustration or rivalry? Is it a very new relationship? It there a lot of trust and goodwill built up between the parties involved?

It takes quite a bit of personal flexibility to compartmentalise all those interactions. To remember what you said to who. And when. What their reaction was. What they asked you to do. What you agreed with them. Or promised to do. What you need to do, now that other events have unfolded.

Clearly there are memory aids to help. Diaries, checklists and notepads. Your prompting children or spouse. But it’s hard to get through a lifetime of all those interactions, without getting it wrong at some point.

At best, relationships are a journey of discovery. Some might say a minefield. Over time, you find out people’s preferences. Their desires. What offends them. What sets off an emotional reaction that isn’t necessarily what you were expecting. And because human beings are complex and changing, you can’t expect that what used to work well in the past, will necessarily still work in the future.

Personal flexibility (PFL) comes into its own to cope. Accept a best efforts effort from yourself. If you learn and adjust, apologise even, people will give you marks for trying. Try trusting them to see the bigger picture.

You may even find yourself becoming the ‘switch’ in the network from time to time. The person others go through in their various exchanges. The person they ask advice from before they act. It’s ok to be exasperated when your friends or family don’t take the advice you give them. The important part is to keep growing and evolving as a person. No one predefines your life for you.

It’s your path to tread and your direction to choose. Bon voyage.

Simon

Household Budgeting and Personal Flexibility

Firstly a caveat: this particular blog isn’t meant to offer specific financial advice to the reader about what investment products or investment classes to invest in. Readers should seek professional advice to help them understand the risks and choices available relating to financial products made available by particular providers.

What is a household budget?

It is simply looking at a period of time, such as the next 12 months. And listing both household income and expenditure over that period, with a reasonable degree of accuracy. If there is little accuracy, the list is merely a dream.

Secondly, try not to confuse precision with accuracy. Precision might estimate items on the list to the nearest penny. But that doesn’t mean those numbers are accurate. Accuracy is about being broadly right (to the nearest one thousand dollars or pounds say).

Fixed costs and volatile costs

Some household spending items are easy to estimate. And won’t change for the foreseeable future. For example, agreed mortgage payments, or room rent.  Others are inherently uncertain. For example, repair costs. Or the earnings & duration of the next ‘gig’ for gig workers.

Volatile costs are a form of uncertainty. And uncertainty can be managed by improving your personal flexibility (PFL). See my blog on ‘Personal Flexibility and Uncertainty’ for more on this.

When you put together your annual household budget, try to identify which items are fixed (reliable) and which line items are volatile. How volatile? Plus or minus 20% volatile? If there are lots of volatile items and the level of volatile (plus or minus) is significant, you could usefully do a ‘best case’ and ‘worst case’ version of your expected budget. Then as you monitor your actual progress against your budget during the year, you can start to take steps. For example, if your household budget increasingly moves towards the worst case version, then as soon as possible, start cutting back on discretionary spending. Or increase the income sources. Likewise, if the actual budget increasingly moves towards the best case version, try to actively save those extra funds ‘for a rainy day’. By increasing your household savings, you are making your PFL stronger.

Lines of credit

It is tempting to use your lines of credit (bank account overdraft or credit cards) to bridge the gap between household income and spending. Try to resist living your life on credit. That resistance will save you money. And increase your PFL, by giving you more short-term options if you need money in a crisis.

Budgeting for time-poor budgeters

The household annual budgeting can be as much of a chore as you want to make it. For my own household budget, I spend as little time preparing & monitoring actual spending as I can get away with. And it certainly isn’t itemized to two decimal places of precision!

Budgeting for big ticket items

How do you budget for big items on your annual household budget? The solution is to slowly save up for them. And buy them when you can finally afford to. Or to use bank loans to buy them. And pay off the loan at a rate you can comfortably afford over time. You’ll need a good credit history to get a bank loan, so bear this in mind.

You will have more personal flexibility, if you slowly save up (no interest costs) to buy the big ticket items. Perhaps think about taking out a loan to only buy big items that will go up in value themselves over time. But where you get a benefit from them every day. For example, a property comprising a home on some land you own. That said, buy at a good price and try not to buy land in an area prone to flooding, coastal erosion, hurricanes etc to reduce your risk.

Quick wins and small triumphs

Try if you can, to have some items in your annual household budget that give you & your family some quick wins and small triumphs. You can’t live your entire life saving up for the things you want. And never actually see any benefits along the way.

Single benefits and family benefits

Try if you can, to include some items in your household budget that benefit the whole family. Not just one or two members. It’s a bit like in the workplace, if the employer offers a pension scheme, all staff can benefit. If they only offer childcare support, or a commuter train travel loan, staff will benefit unevenly.

Time and money trade-offs

To some extent, budgets are a trade-off between time and money. For people who are time-poor but money rich, they pay for more support services and that is reflected in their household budget. For those in the opposite position, they have more of a do-it-yourself culture and save money by say growing their own food, doing childcare inhouse and cooking their own meals. Be realistic about your budget and what trade-off will work for your household.

Budget trade-ons versus budget trade-offs

One way to improve your budget is to look for tradeons rather than tradeoffs. A trade-on is like a double benefit. For example by cutting back on expensive entertainment and doing some self-study instead, you increase your marketable skills (to earn more income), but save money in your household budget as well.

If you prepare a first version of your annual budget and don’t like the result, look for some trade-ons to make the budget more viable.

There tends to be a positive correlation between trade-ons and PFL i.e. the more of one, the more of the other is possible.

Lastly, if you find these blogs useful, please spread the word, so others can benefit too.

Simon

Managing Uncertainty and Personal Flexibility

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How does personal flexibility (PFL) help to manage uncertainty? First, let’s look at what uncertainty is and how it arises.

What uncertainty is

Firstly, uncertainty can be positive as well as negative. Why positive? Not knowing who your future soul mate is, or whether you will even find one, makes life exciting. And probably changes your behaviour for the better too.

Two kinds of uncertainty are:

  • The known unknowns. We might know the current membership of those we are related to by blood. What we don’t know, is exactly when that membership will change (births and deaths). Another version of this is the second-order unknowns. We don’t know the names of our children’s children if we haven’t had children of our own yet.
  • The unknown unknowns. This includes unconscious incompetence. We aren’t sufficiently aware that we aren’t equipped to solve a problem. We wade in and act. And then anything is possible!

Our influence on uncertainty can vary too.

  • A small intervention on our part, can have a large influence on the level of uncertainty present. For example, we visit our doctor/dentist before the effects of a persistent ache become a bigger problem for us.
  • The level of effort on our part can essentially match the change in the resulting uncertainty.
  • It might take a large intervention on our part, just to achieve a small change in the level of uncertainty in something we encounter – think of raising a teenager.

We might put in place some risk mitigations to deal with uncertainty. The trouble is that we aren’t so good at identifying if we have enough types of mitigations. Belt alone? Belt and braces? Belt, braces and seatbelt too? Belt, braces, seatbelt and airbags? We aren’t so great at judging the relative strengths of those mitigations either. That’s one place where personal flexibility is helpful – design, test, assess then modify.

How does uncertainty arise?

  • Unknowns can arise because of big external changes. War is declared. Brexit is activated. A massive natural disaster hits an area.
  • Unknowns can arise because of a lack of information. For example, customer demand for a new product can only be estimated. Until the market reaction is seen. And actual trends understood.
  • Unknowns can arise because of a lack of time. For example, time to research the facts and solve a mystery is lost, as new events create new crises that take priority.
  • Unknowns can arise because of attitude– progress is undermined due to bias. For example, people with control of certain information choose to discriminate and not make it available. ‘Need to know’ and early tip-offs are related examples.
  • Unknowns can arise because of volatility. For example, rescue services, trying to assess actual threat to life in a hurricane, is hampered while conditions of extreme turbulence prevail.
  • Unknowns can arise because of a lack of buying power to control or influence certainty. If we can’t afford to buy real options, it can be hard to acquire them.

How can personal flexibility help? 

Broadly, if you see more uncertainty emerging, increase your PFL to compensate. Widen your skill base and diversify your income sources. Teach your children to become more independent e.g. earn their own money. Or shop & cook for themselves.

In the UK, with uncertainty over the Brexit outcome in March 2019, some people are reducing their personal debt levels. Or stockpiling canned foods in the short term. Just in case.

PFL can influence the speed at which uncertainties arise or reduce. One idea is to use PFL to develop some ‘brakes’ and ‘accelerators’ on uncertainty. The point being that just like driving a car, you as the driver control the speed. A simple example is diversifying your income sources to act as a brake on the effects of economic downturn.

Avoidance (risk transfer) can reduce your uncertainty. Hedge some key risks. For example, with professional advisors, influential friends, or insurance products.

As always, if you find these blogs useful, feel free to tell others.

Simon

Real Options and Personal Flexibility

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What has flexibility got to do with options?

Quite simply if you have more options, you have more flexibility. In uncertain situations, or if you are somehow keen to grow (wealth, skills, influence, reputation, character development), having options is valuable.

Of course, having more options isn’t useful if you can’t make a decision when time is pressing. And having a set of options that aren’t relevant to the problem you’re facing isn’t particularly helpful either. Unless you can trade them for the ones you actually want.

What are real options?

They’re not as scary as they sound. Wikipedia says ‘a real option itself, is the right—but not the obligation—to undertake certain business initiatives, such as deferring, abandoning, expanding, staging, or contracting a capital investment project’. In the personal flexibility sense, real options are rights we have paid for in the past and hold.  If the conditions are right, they can be used (exercised) at some point in the future, to buy or sell something to benefit ourselves.  Or benefit those we choose to help.

There are a couple of different types of real options. Call options are options we have purchased in the past, that give us the right to buy something. Put options are options we have purchased in the past, that give us the right to sell something.

What are some examples of call options in our personal lives i.e. things we’ve paid for in the past that give us PFL in the present and future?

  • Loyalty points, or frequent flier points accumulated, that are still valid. Purchase qualifying items and you have the right to use the points to obtain discounts on future purchases.
  • Multiple passports (the legitimate right to citizenship in multiple countries). Pay the application fee and once the passport is issued, you then have the legal right to buy the same things the other citizens can buy.
  • Insurance policies with a claim excess. Pay the insurance premium, make the claim, pay the claim excess and the item will then be replaced.
  • Personal credit cards and overdraft facilities. Pay the annual account fee and any interest charges to access the credit amount.
  • Fitness, health and knowledge you’ve built up, if they qualify you for access to something fairly exclusive in the future, that costs money.
  • Physical and data security measures and investments made. Pay the fee, log your security breach event, pay for the investigation and hopefully damage will be remedied.
  • Divorce papers – once signed and the divorce lawyer costs are paid, the papers give you the right to legally marry another person (providing they’re not already still married).

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What are some examples of put options in our personal lives i.e. things we’ve paid for in the past that give us (or our loved ones) the right to sell and hence PFL in the present and future?

  • Trial period agreements.
  • Product warrantees, price-matching features and money-back guarantees.
  • Sublease clauses. For example, you rent a two-bedroom flat and there’s a clause in the lease agreement allowing you to rent out the second bedroom for financial benefit.
  • Your estate (once you’ve paid the solicitor to draw up your will). Ownership of this option transfers to the beneficiaries of your estate, upon your death.

Real options and student career advice

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In the general education system, little emphasis seems to be given to teaching students how to manage their real options. Then, when students graduate & join the workforce, they lack awareness about real options management in the workplace. Instead, at best, students receive advice from relatives, friends or teachers about getting a good education and working hard, to open up more life choices to them.

Perhaps too many young people learn from life experience – the ‘school of hard knocks’ (why doesn’t Western culture strongly preach the folly of learning this way?). And learn from repeat situations (once bitten, twice shy), that having choices is valuable.

What the young people need is more advice on how not to get bitten. And coaching to position themselves to have choices other than getting bitten. Young adults may also learn from observation – being inspired by designers to mimic the design flexibility that they see.

In the view of this blogger, one of life’s ironies is that for many young people, by the time they realise that older people’s advice to them on the above things is just as relevant today as in yesteryear, the consequences of have few options and choices is already hitting them hard.

In summary, holding real options in our personal lives, is a tangible form of personal flexibility. It follows that if we want to increase our PFL, we should accumulate real options in advance, in the areas of PFL that we want to improve.

Some areas to look at, if personal growth and uncertainty management are some of your goals; obtaining real options concerning wealth, skills, influence, personal reputation and/or character development. A key point is to build up an ‘options portfolio’ i.e. don’t just concentrate on obtaining real options relating to one of them.

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Periodically, we will use or ‘exercise’ many of the real options we hold, so another key point is to replenish our stocks of real options regularly.

If you found this blog helpful, feel free to tell others. Constructive comments are also welcome.

 Simon