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Take the compounding interest quiz; Looking for passion in all the wrong places; The ties that bind us to a miserable job; Building blocks of wealth; Passive versus Active investing

Personal Finance
Take the compounding interest quiz; Looking for passion in all the wrong places; The ties that bind us to a miserable job; Building blocks of wealth; Passive versus Active investing
Albert Einstein, the man who discovered the basics of nuclear bombs, once described compound interest as the most powerful force in the Universe.

By Amanda Morrall (email)
1) Compound interest
I've taken some heat before from some of you for posting too many foreign sourced Personal Finance blogs.
Sorry, there just isn't that much locally generated content. I think you'll forgive me for this one from the Globe and Mail when you scroll through the top part and take the compounding interest quiz. Do it now!
2) The dream job
Lately, I've been reading and thinking a lot of the dream job. What it looks like, pays and how it feels at the end of the day? Passion is intimately tied up with the dream job but maybe people seem to struggle with that one. Often, they don't know what they're passionate about or for that matter what makes them happy. I guess I'm lucky that I found my passion early on.
I love yoga, helping people and feeling connected to a greater cause.
Personal finance guru Ramit Sethi suggests that rather than beating yourself up looking for your passions, consider what you are naturally or have become really good at. It's a bit of a chicken and egg scenario but he could be right on some levels. If passion isn't serving as your guide, perhaps your skills and talents ought to. Here's a passage from one of his blogs on dream job creation.

1. To find your passion, you need to open up opportunities. You do that by getting extraordinarily good at what you do.

Ask yourself this: If 5 years ago, I’d asked you to predict where you’d be today, would you have been able to?

Of course not. So isn’t it ironic that most of us wait around for our “one” monolithic passion, as if it’s going to stay the same for the rest of your life?

We change over time. Our passions change. So trying to pinpoint our “one” passion makes little sense. Today, I’m passionate about behavioral change and helping you find your Dream Job. A few years ago, that passion took the form of teaching people about money. Who knows what it will be tomorrow?

So what do you do?

You open up as many opportunities as you can so that when you discover a passion, you’re well-positioned to take advantage of it. My friend Elizabeth decided she was interested in letterpress (high-end stationery) and she took a few classes. Then she realized she loved it, kept doing it, got very good, and recently got written up in the Wall Street Journal. She never predicted that — but she explored a bunch of interests and this is one she’s passionate about right now.

The irony of the woo-woo people who write in about finding your passion — think kooky life coaches — is that they’re actually not very skilled at anything. If you’re not good at your day job, what gives you the right to think you deserve to find your life’s passion when you haven’t even put the time in to become good at something?

 2. Internalize the idea that passion is often a by-product of becoming extraordinary.

Many of us operate under the Invisible Script of: First, find my passion. Then, get really good at it.

Counter-intuitively, passion often works the opposite way.

Try this: First, get really good at something — let’s say, email analytics, or assisting an executive, or writing for your blog. Think about it. In college, how many of us took a class where we didn’t really know what we were getting into…and we ended up loving it? Yet if we were to simply read the course catalog, we never would have taken it.

Then, you realize, wow, I actually love this.

You get good at something, then often you find out you’re passionate about it.

3. Use a series of micro-explorations instead of grandiose Pointless Passion Pursuits.

Tell me if this sounds familiar: You sit in your room with a blank sheet of paper, listing off all the things you love and all the things you’re good at. Then, magically, you’re supposed to somehow “see” what you should do with the rest of your life.

How many of us have done this? How many of us were told to do this by experts or career books? Please kill me now.

When I tested this with people, we realized how unrealistic it was. One of my friends, for example, had dropped out of law school and simply had no idea of what was out there. She had all kinds of crazy ideas, like “I could never work in technology because I don’t have any technical skills.” Yet a few years later, she’s earning hundreds of thousands of dollars a year as a 20-something top performer. (I’ll share her story with you next week.)

The point is, she didn’t know what she didn’t know.

A better suggestion: Decide to enroll in 2 classes in the next 2 months. Anything you have the faintest interest in, find a class. For example, oh, you always wanted to know how to rock climb? Pay $50 to take a class. Oh,  you want to know how to sew paisley patterns? You can’t find an existing class? Go on Craigslist and offer $75 to someone to teach it to you.

The money isn’t the point. You can barter or attend free community classes. In fact, it’s not even about the classes. The point is that instead of sitting in your room and trying to “think” your way to your passions, the micro-steps of testing your assumptions can radically change your approach to finding your passion.

3)  Fear of the unknown

On the subject of passion, it seems a chief obstacle for many is the fear of the unknown and with that their reluctance to give up the security of a job that pays but which they hate or merely tolerate.

In the following Harvard Business Review piece,  Daniel Gulati blogs on the ties that bind us to misery. 

4) Building blocks

I received an email yesterday from a recent grad (20 years old) who was a frequent reader of our website but looking to digest more financial information to help get him off to a good start. I was super impressed. The fact that he's seriously thinking about money at this early juncture in his life means he's off to a flying start. I sent him off with some of my favourite books, websites and a big pat on the back. I know we've done the reader's choice thing before but if you want to add your favourite titles into the comment thread I'm sure this fellow would be grateful.

And for the benefit of other new graduates, here's a blog outlining some of the personal finance building blocks as you venture into workforce. I appreciate there is heavy reference to 401ks but in most instances you can substitute KiwiSaver (or another workplace retirement scheme). Basic lessons still apply.

5) Passive versus Active investing

I'm constantly sparring at work with Little Boss (no reference to stature, just chain in command) about whether it is better to be in an active KiwiSaver or a passive one. (Eds: Who you callin' little!) It's not a simple debate and there is no right or wrong answer. It comes down to a lot of things including your age, risk appetite, time frame for investing, your other assets (and liabilities) and also basic beliefs about markets.  I don't think Little Boss will mind saying he's a fan of the passive funds. He's terribly conservative. (Eds: Too right!)

I'm what Gareth Morgan would call greedy, so I'm in the active camp. The problem (for lack of a better word) with this camp is finding a fund manager who can ouperform the markets (over the long-term) and who justifies their above average fees. You need to weed out those who have just been lucky. After taking it on the chin this year in KiwiSaver, I've been humbled and I'm looking enviously at conservative funds.  But not all growth investors will be moaning like me. 

Here's more on the subject from Bloomberg. You can thank the Little Boss, a.ka. the Bear, for this one and #3. 

To read other Take Fives by Amanda Morrall click here. You can also follow Amanda on Twitter @amandamorrall

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Via Mish,


Michael Hudson, "In America and Europe, Crime has been Decriminalized"




"She said making information available is part of the democratic tradition in New Zealand and was one she wanted to see continue.Hekia Parata". Herald

Really...without a Minister causing a delay...without details being made secret....I think Parata knows very little about the history of information being NOT released to the public because of govt in NZ.....or she is just spouting BS.


Wolly - many debates in parliament indicated that Hekia Parata doesn’t have enough knowledge, about issues. Here an example of many:


As a minister it is easy to say YES – and then hand over responsibility to the ministry, which in general cannot not handle projects to satisfaction.