existence, refactored

Just a random dilemma I’ve been thinking about this past week.

There are 3 things I can buy with around 11,000 pesos. Sure, I can just buy all 3 at the drop of a hat, but that would take the fun out of this thought experiment. :p

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When I was in high school, buying a large Coke from McDonald’s was the most cost-effective way to get your soda fix. Sure, about a third of the cup would be ice, it’s better than shelling out 20 for a 12oz can from a vending machine.

Nowadays, however, it seems that most restaurants get their profit from their drinks, with Jolibee and McDonald’s being the worst offenders:

• 7/11 Big Gulp (22oz) – PhP 25
• Big soda (16oz) at Sbarro – PhP 28
• Coke Light 500ml PET (17oz) at Mini Stop – PhP 30
• Coke Light 1.5l PET (~51oz) at Mini Stop – PhP 43
• Large soda (16oz) at Jolibee and McDonald’s – PhP 45 ಠ_ಠ

Think about it next time you order fast food.

Was invited to talk at today’s Freelancing for WebGeeks event. I may not be your usual freelancer, given that the venue’s not a hassle for me (Exist TechBar Manila, my current gig’s with Exist) so I obliged.

Anyway, here are my slides. As usual, they don’t make sense without me talking.

Remember when I suggested to “track down and itemize every expense you make down to the peso“?

Well, here are the results of my financial tracking:

(I obviously fudged around the numbers a bit to give people a hard time guessing my income/expenses. )

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The Lottery: another way for the government to tax the (typically tax-exempt) poor.

As much as I’d like to shy away from yet-another-”greed is evil” post, recent circumstances have led me to mingle with people who still think spending money on the lottery is a good idea. So instead of being a jerk IRL, I’ll just post the arguments against the lottery here online.

The first argument against the lottery is that the odds are stacked waaaaay against you. Anyone who has even the basic knowledge of Combinatorics and ROI knows that the lottery is a loser’s game.

Don’t believe me? Why not try this little app I made using Rails 3 and a dash of jQuery. You could even check the source code to see if the drawing algorithm is sound.

(It’s not an original idea, though. I just based it on a Hacker News link last week.)

The second argument is that the people likely to win the lottery are the people least likely to have the financial literacy to handle such a large amount. But I guess you already knew that.

I’ve mentioned multiple times before that earning more money does not equate to financial stability. You may think that that’s just some theory I picked up in random financial books, but thanks to a certain show of internet drama last week, I now have a good example of why Notorious B.I.G. was right:

• The whining of the rich by Michael O’Hare, and
• a follow up post In Which Mr. Deling Responds to Someone Who Might Be Professor Xxxx Xxxxxxxxx by economist Brad DeLong

For those of you who don’t have time on their hands to read the posts and comments, here’s the summary:

Law professor and his Oncologist wife earns over half a million dollars a year. They’re going to lose the Bush-era tax cuts they have, and so he’s whining that he won’t get to pay for all of his expenses i.e. he’s going to be poor.

Before you go “WTF, I’d be happy to earn just $20K a year!” I would like to point out that the couple’s problem isn’t limited to people earning that much. A lot of middle class people also fall into the same trap as that family.

It all boils down to pride.

Say you’re a twenty-something professional earning PhP 25K a month after taxes. It’s not hard to imagine what type of people you’re hanging around with: yuppies obsessed with getting the latest cellphone models, clubbing and out of town gimiks, and looking forward to getting that promotion/credit limit increase so that they could get a car loan.

You basically have two options here. The “easy” route is to just go with the flow: spend your money like them. Get your monthly cash flow to negative just so you could appear as rich as your friends. Don’t worry about debt: you’ll eventually get promoted later and by then you’d be able to pay all of them off.

But you won’t. By the time you’re earning more, your colleagues have changed too. They’ll be spending more so you’ll also be spending more. Before you know it, you’ll be pulling in a 7 digit yearly salary but still have money problems like the good professor in the story above.

Or you can take the second option: swallow your pride.

The most glaring indication that the professor in question has no financial literacy whatsoever is his insistence to get a loan for a $1M home when he hasn’t even paid off his student loans yet. This irrational focus on appearance has ruined many relatively well-off families (including my family, but that’s a different story altogether).

Don’t think of it as “living below your means”; think of it as “not living beyond your means.” I’m not asking you to take a vow of poverty here; it’s still ok to hang around with your gadget obsessed friends, just don’t get pressured into doing (financially) stupid things.

If all of them are carrying iPhones and Android phones just for show, why should you waste a month’s worth of effort on such a device instead of putting it in better investments? You will be teased, yes, but in the long run, who’s going to have a lot less financial problems when shit hits the fan?

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Bonus:

Here’s what happens when whole nations get the “get a crapload of money but don’t know how to spend it” dilemma: The Resource Curse.

I haven’t been blogging lately because of the recent changes in my lifestyle (from bum to semi-freelance). From the looks of things, though, I might have to setup a regular blog update schedule, say once or twice a week, in order to improve my gravitas (?) as a freelance software engineer.

Anyway, to kick things off, let’s start with something that happened to me a couple of weeks back.

I received a call one Saturday morning from a guy who was offering me a job. Or something like that. It was around 9 in the morning that day and it was still an hour before I should wake up. All I recall is that the guy mentioned something about being in a “multinational company” and I was referred by a friend to a job with “high income” and “flexible hours”. Being groggy as I was, I immediately responded with what first came into mind: that I was not interested in the income and all I cared about is whether the project was interesting and whether the work hours are flexible enough.

I believe the guy hesitated for a moment after hearing such an unusual answer (people want money, not time), but regardless, the guy scheduled me for a 6:30 PM meeting the following Thursday at their office in Makati. The after-work hour meeting time was supposedly due to him being busy and that was the only time that he could meet with me.

Looking back, the whole thing was really fishy had I thought about it. But I didn’t; my past few freelancing gigs were of the same “referred by friend/acquaintance + meet with the guy to talk the job over” setup and they all went well. Besides, compared to those gigs, the friend that referred me this time around was a lot higher in the “people I trust” list.

Fast forward to the following Thursday. The first thing that came into my mind when I entered the guy’s office was:

Aw crap, I got suckered into an MLM seminar.

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This got into my mailbox a few days ago:

This is the third time an Indian dude (I checked the IP address) took time to go to my contact page and answer the CAPTCHA just to send spam about SEO; I think it’s a good time to speak my mind about SEO in general.

But first, let’s talk about how wrong this approach is.

If you’re going to offer to do business with me, you should have at least read my About page. There you should have realized that (a) I’m not doing this site for money, popularity, or the like and (b) I am an experienced software engineer and I could probably do better than you in SEO if I put some effort in it.

This display of ignorance alone is enough to make me throw your mail into the spam folder of my mailbox.

And now, back to the topic of SEO.

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To me, Search Engine Optimization is like investing in stocks. You can go the slow-and-steady Warren Buffett way, or you can go the “get rich quick” day trading way.

Most SEO (including the spam I got) falls under the latter; both this “hardcore” SEO and day trading promises huge profits for little effort. In reality, it’s the opposite—in the long run, the costs of using these two approaches often overshadow whatever profits you would gain.

A better approach for both SEO and trading would be to stick to the basics and take things slow. Here’s just some of the basics:

• Make your site SEO friendly, but don’t go overboard. For a WordPress site, this would mean getting a domain with your name on it, enabling pretty permalinks, installing All in One SEO Pack and Google XML Sitemaps, and adding either Google AdSense or Google Analytics somewhere in your themes. Anything beyond that is overkill IMO.
• Write interesting posts. Getting people to want to read your posts is really the best SEO you could do.
• Rubbernecking or writing stupid controversial things are fine (hey, it’s your site!), but I personally won’t recommend it. You might get a lot of hits at first, but don’t expect that to last once you get labeled as a douchebag.
• Join relevant communities and talk to people. If you’re nice and interesting enough, you don’t even need to advertise your site address—they’ll be the ones to look it up.
• Be consistent. You don’t need to post something everyday, but try not to leave your site un-updated for more than a few months.

Granted, some of the basics take a lot of effort (like writing interesting posts) and may even take more time and effort than “hardcore” SEO, but you’ll be more certain of getting higher exposure in the long run. The key here is that you shouldn’t focus on putting your site on the top of the result lists. Instead, you should focus on the quality of your site: getting on the top of the result lists will automatically follow.

This one’s going to be a bit harder than the previous post.

Know your financial situation.

It is common to see people living beyond their means just because they aren’t aware that they’re earning less than they’re spending. You don’t need to read books to know that the obvious solution to this problem is to be aware of one’s financial situation.

However, personal wealth is more than just your paycheck and bills. In order to paint a better picture of your financial situation, you must track down other aspects of your finances and your life.

For this tip, I’ll be asking you to take note of the following for the next month:

Your passive income.

This is the money you’re getting in a month that doesn’t require any work. The simplest example would be collecting rental fees for a house that you leased to other people. Other examples would be interest on bonds, valuation increases in stocks, and profit from businesses you’ve invested in.

If you’re a normal twenty-something professional, this should be zero.

(Spoiler: financially independent people have a passive income higher than their expenses.)

Your wealth.

To simplify things, just ignore your “assets” and just focus on your wallet and your bank accounts at the end of this month.

Your current wealth should be the sum of the money in your wallet and all of your bank accounts (credit limit not included since it’s not real money) minus all of your debts. Credit card balance counts as debt and should be subtracted from the total unless it’s on a 0% monthly installment (then it should be counted as part of “expenses” below). Also, if someone owes you a substantial amount of money, add this to your wealth.

The normal value for a twenty-something professional would be at most at the low 5 digits (Philippine Pesos) to around negative 5 digits.

Your income.

This should be easy. Just get your paycheck and take note of your gross income.

The time you spend for your income.

This is a key point from the book Your Money or Your Life. The obvious example would be to compare a person earning PhP 5,000.00 for 40 hours of work to a person earning PhP 2,000.00 for 10 hours of work. Even if the two are set in the same time span (say, a week), the latter is more appealing because it’s 200 pesos/hr compared to 125.

The not-so-obvious way of thinking stated in the book is to take into account the other hours you spend for the sake of work. There’s commuting. There’s the hours you spend dressing up for work or shopping for work clothes. There’s the work-related meals. There’s the “decompression entertainment” and vacations to keep you sane. There’s the visits to the doctor due to work related stress.

It won’t be surprising to find out that a person who works 40 hours a week spends another 30 hours a week on the average to support his job.

So for this step, track down how many hours you’ve spent this month as a side effect of your job.

Your expenses.

Here’s the hard part:

Track down and itemize every expense you make down to the peso.

I would suggest you go low-tech for this one, using a small notebook or hipster PDA then transferring it to a simple spreadsheet instead of being tempted to find an app for your expense tracking. The problem with the latter is that their classification systems are usually inflexible. You’ll have more freedom classifying your expenses when you do it manually.

Yes, it’s annoying and yes, it’s easy to fall off the habit after a few days. However, knowing your financial situation depends on how accurate you track down your expenses. This is the only way you’ll see if you’re spending too much on certain things like food and clothes.

This process might also cause some feelings of guilt, especially if you notice that you are spending too much on stuff like food and clothes. Don’t feel guilty about your expenses (yet). You’ll just fall into the same trap as binge eaters who feel that they need to compensate for their overeating but just end up in a worse condition in the long run. At this point, just spend as you would spend normally.

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Next month, I’ll write a follow-up post to discuss what to do with those numbers.

Ignoring for a moment that this video comes from an MLM guy and that I hate MLMs with a passion, the following video is a must-watch in my book.

Edit: the video was taken down. -_-

Anyway, here’s the gist of things:

• Poor people waste their money on inexpensive but useless stuff. In the Philippine context, that might be cigarettes or cellphone load.
• The middle class are worse off: they spend money on stuff that drains them of money. Houses, cars, spending on credit but just paying the minimum per month, etc. Most of them only appear to be rich, but in reality they don’t have any accumulated wealth.
• The wealthy spend money on stuff that gives them money: investing on stocks, building businesses, etc. They actually avoid buying what the things the so-called “rich” people buy because they know it can jeopardize their financial independence.

It’s nothing new if you’ve read a couple of good financial management books. The good part about the video is it’s short enough to share to “busy” friends.