Credit Score Games

I’m supposed to be the “Finance Guy”, but I’ll share a dirty little secret:  My wife’s credit score is higher than mine!

OK, hers is quite high: 783 averaged over the three credit bureaus: Experian, Equifax, and TransUninon.   According to her score reporter her score of 783 is higher than 93.77% of U.S. consumers.  783 is “Excellent” credit.

Mine, I trust a bit more.  I paid $19.95  for two scores from myFICO.com and a free one from creditkarma.com (which seems to be the least offensive “free” service I could find… decent privacy policy, decent reviews, etc).  Bottom line:  747 is my current average score.  It turns out that this 36 point difference is fairly big — the difference between “very good” and “excellent”.  If 783 is in the top 93.3%, 747 is merely in the top 60-65%.

I find this all very strange since I recently cancelled a credit card that I had for 10+ years which had a $48,000 credit limit because they started charging an annual fee.  This, I think, hurt my score.  The other thing that hurt my score big time is a missed payment of about $95 dollars.  This happened because my credit union was merged and the auto-pay for the annual fee didn’t go through. Ouch!  And that was about 30 months ago.

It appears that the gold standard (true FICO) score average is 770.  Moreover the best practical score is 785+.  Notice that is very close to my wife’s average score. I’ll call 785 the platinum standard.  Any improvement above 785 is essentially meaningless, except as a “game.”  A 770 score will qualify you for just about the best rate on anything, a 785+ score will practically guarantee it.  (NOTE: Lenders use more than your credit score for making lending decisions, such as your years in profession, years at current employer, current salary, and several debt ratios based on your salary, etc).

Since my current average FICO (2/3 FICO, 1/3 “other”) score of 747 is 23 points below the “gold” standard of 770, I wish to increase it by at least 23 points.

Here’s my plan:

• Pay everything on time with autopay. Double-check that there are no hiccups. If there are, promptly call the credit card company and ask how it can be fixed.
• Get 2 new credit cards.  This will initially hurt my score, but I believe it will ultimately help.  Whether it does or doesn’t is part of my credit-score experiment.
• Request credit-limit increases on all my cards… so long as they don’t require a “hard pull” of my credit score.
• Keep paying all but one of my cards balances in full every month. This means no “finance charges” (aka interest charges).
• Pay just over the minimum payment on my new 0% transfer-fee, 0% interest for 15-months “Slate” card.  [Ironically the balance comes from my wife’s card!]

So far some things have happened…

1. I received two new cards.  I requested a limit increase on one and they doubled my limit.
2. I requested a limit increase on a card I have had for 7 years, and they doubled my limit.
3. I asked about increasing the limit on a card I have had for 3 years, but learned that it would require a “hard pull” of my credit data.  Thus I said, nevermind, keep the old limit.
4. I requested a limit increase online for a 4th card.  It was not clear if it would require a “hard pull”, but I will eventually find out if a) If and how much of a limit increase I receive, and b) if a “hard pull” was done.

Based on the credit score simulators at myFICO.com, and creditkarma.com, I anticipate that initially my score will drop between 3 and 10 points.  That’s, OK.  My goal is to improve my average FICO score over the next 6-12 months.

Depending on how #4 above turns out, I will easily have more than doubled my total credit limit from about $26,000 to at least $63,000.  Since I am holding a balance on the zero-interest intro-rate card of $12,500, my credit utilization will be about 19.8%.  This is higher that optimal (about 2-7%), but still far better than the 48% level I would have had, had I done nothing!  It looks like the minimum payment will be $125/month at first, so I will pay about $135/month.  Unfortunately auto-pay does not have a setting of pay the minimum balance plus X dollars. So I will simply set auto-pay to pay the minimum balance, and I will augment with monthly extra payments.

The thing to remember is that I won’t be paying a single penny in credit-card interest.  In order to ensure this, I don’t dare charge anything on the “balance transfer” card, as the credit card company is likely to apply any payments in a way that is least favorable to me (e.g. most favorable to them).

Currently this experiment is just a game to me.  My wife and I have a 3.00%, 15-year, fixed home loan that we got with a 50% down payment.  I don’t see any reason to pay extra on that.  Further my only other debt is the 0% on the teaser-rate balance transfer card.  I have heard that paying even a single dollar over the minimum payment on such a card is a favorable sign for the mysterious credit score.  I’m willing to throw a few extra bucks every now and then on the off chance that this is true.  (However, just before the intro rate of 0% expires, I will certainly pay the full balance!!)

I will keep score on my little credit-score game using two free sources that are staggered by 2 weeks, and which both pull from TransUnion.  I will also monitor my credit history on a revolving basis every 4 months, by pulling from each agency in a staggered basis (from www.annualcreditreport.com) for any evidence of unusual activity.  The two-week (bi-monthly) staggered scores will be my benchmark for now.  When I feel that my scores appear sufficiently awesome, I will probably pay a one-time fee to myFICO.com to get the “real deal” scores again.

So, here are my goals/plans for the next 6-12 months:

1. Get a 770+ score based on TransUnion data (using free scores)
2. Get a 785+ score based on TransUnion data (using free scores)
3. Pass my wife’s score, if possible 🙂 [again based solely on the two TransUnion-based scores]
4. When I feel the TU-based scores are high enough, pull one-time myFICO.com scores to see if I really satisfied goals 1,2, and 3 on scores that actually count.

Since I don’t use credit for anything but a mortgage, my score doesn’t really mater too much.  However, because credit scores can affect insurance rates for cars and home(s), I do care a little bit.  However, mostly I care about testing my theories about credit-score improvement. And I care about good-natured competition with my wife, too 🙂

Please don’t take offence if I sound like I have a cavalier attitude about credit scores.  I know that they can be incredibly important to people at various stages of life (such as when buying a first home).  I have learned that mental “game play” can be a powerful “idea formulation” tool for ultimately making smart financial decisions.  Temporarily framing the problem in terms of a “game” can help in separating emotion from cool-headed rationality.  I take investing very, very seriously — however I have also learned a lot by playing games on the side with relatively-small “fun money” financial accounts.  Credit and finance are serious and important topics.  Perhaps ironically, introducing a little levity in the process every now and then can be a useful method of making serious progress and (sometime) serious money.  At the end of the day I am serious…. however, before I take irrevocable actions, I often engage in fun as part of the decision-making process. When I commit to final decisions, I  strive to be extremely focused and grounded.

I hope to keep updating this blog about my “credit experiment.”  Hopefully my findings and observations may be of some use to you.  Until then, all the best to you and yours!

 

 

 

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Why I didn’t get a 4.0 in College (The first time anyway)

My undergrad GPA was 3.97.  In all off my classes but one I earned an “A”.  I steered clear of the dreaded (by me) “A-“.  However, ultimately, I got one non-“A” grade — a “B-” in International Marketing.

I am proud of this “B-” for a variety of reasons.  But let me first tell you quick story…

I signed up for International Marketing because it satisfied two university pre-requisites 1) Multi-cultural. 2) Global.  Two birds, one stone.  It also looked to be an easy “A”.  Finally, it seem like a class that would have a good percentage of female students. Hey, a lonely engineer can and should play the odds!

Anyhow, things went well at first.  I was invited to several study groups, and I picked one based on the attractiveness and relative intelligence of the students.  I finished midterms with a solid A.

Everything seemed fine until the final exam.  The professor said that the final exam would be take-home, open-book, and open-note.  It would be graded on a curve.

I took my test home and started answering it.  It was a difficult and unusual test.  Questions like “The 5th P of marketing is _________” and “The example of _________ in Japan shows how the supply/demand curve can be invalid.”  I soon got contacts and calls from my teammates and classmates asking to “share answers.”  I refused.  They were baffled and said, “everyone is doing it, why shouldn’t you?”  I said, “I don’t cheat.” Some looked at me as if I had the plague.  I suppose they feared I would rat them out.  I did neither.  I did not cheat, and I did not rat.

I got a “D” on my final exam and initially a “C” for the course.  I went to the professor and complained that the 5th P was distribution AKA place, and so on.  He agreed to change my grade to “B-” because of my previous grades and my demonstration of knowledge.  As I said, I did not rat out my fellow students who had cheated.

It is ironic, perhaps, that I got a B- on an easy class.  International Marketing was not nearly as hard as Solid-State Physics 2. Believe me!  How does the barrier voltage of a PN junction respond to an increase of 10 degrees Kelvin? List the factors that determine your decision.  That is HARD.  What if the n-type doping is increased 10X?  That is relatively HARD.

I could have cheated and gotten an A, but I would not have earned an A. I probably could have ratted out those who I knew had cheated and also gotten an A — but that is simply not my style.  I got a “B-“, but I did it my way!

That was not the only take home exam in my undergrad.  All the rest were in engineering courses… and I was never asked to cheat.  I think that speaks to the psychology of most engineers. We, in general, do not lie, cheat, or steal.  That does not mean that there are not exceptions.  It only means that I have seen few.

What is the moral of my short tale? 1) Professors — Don’t give take-home tests. 2) When in doubt, trust Engineers. 3) Don’t cheat.  You will sleep easier.

What does this have to do with entrepreneurship?  A lot!  You WILL be faced with moral dilemma on a regular basis and you will feel like the fate of your business is on the line.  And it may well be. It is tough– tougher than I ever imagined. I have stretched the truth, and I have regretted it.  But I have also told the truth when I made a mistake on an Excel spreadsheet that it is very unlikely anyone would have noticed.  I have said “I made a mistake, attached to this email is the correction, I apologize for the oversight.”  And, OH!, the relief in hearing back from my client: “Thanks for pointing that out.  We appreciate your diligence.”  [These are not exact quotes, but they are my best recollection.]

I have learned, contrary to popular belief, that honesty can and does work. Further, to err is human. If you admit (your own personal) human error, the “good guys” will appreciate the candor. If you get significant backlash to admitting error, you are probably working with the wrong people.

I have learned to sculpt and even, sometimes, bend the truth.  However, the truth remains intact. Wordsmithing is necessary and important. Retaining personal integrity is even more important. Admitting and correcting mistakes is the best course of action — the sooner the better.  Just ask GM!

The Revised Entrepreneurship Lifestyle

Work, work, and more work.  Add a side of worry.  But, also excitement and elation.  Work is more often invigorating, rather than taxing.  However the days and nights can be long.  I’ve been pretty much working 80+ hours per week.  That may sound bad, but it’s not.  Why?  Because, as Frank said, “I did it my way!”

The beauty of the situation is that my company, Sigma1 Financial has several big things going for it:

1. Investors.  Sigma1 now has seed capital for growth.
2. Good, powerful references.  I’ve made some friends in high places during the HALO beta tests.  These are good guys who apparently liked me, my software, and my work ethic.
3. Revenue.  Sweet, sweet revenue.  This means money to plow back into marketing, technology, and, yes, legal.  Sigma1’s law firm charges $250-$350 per hour — but they can because they are worth it.
4. Insight.  More important even than the technology, because I have been obsessed with one thing for a long time — portfolios.  How to improve them by using everything I know, can learn, and can discover.  And I’ve discovered some very useful things.
5. Technology. The single most powerful piece of technology is the tech to robustly optimize diverse, configurable, user-defined risk models.  The other cool tech is synthetic expected-return modelling that works in concert with semi-variance optimization.  And there is more cool tech, sometimes written in less than a week based on client requests.

So, it is summer and a spend most of my waking hours “working.”   Sometimes, though, the work feels like play.  Like tinkering. I get to explore ways to mitigate financial risk for real people and  institutions.  I get to work directly with portfolios large and small (well…. large and small are relative terms, eh?)  Lets just say many, many millions.  And I work hard to help make them better.  I don’t control anything; I just provide insights, with the help of the HALO Software Suite I developed.

The difference between now and then (say last year) is this:  I learn a lot almost every day.  I am learning  sh** tons!  Then, during corporate vassalage, I learned little of value at work.  My learnings then were largely trivial. I was not given much latitude to learn; I was leashed.

The leash is severed, by my own hand.  And I work as hard, or harder than ever in my life… for me, for my company, and for my investors.  And it is a roller coaster ride.  So far, it is a thrilling and largely fun ride.  When the ride is over, I keep getting back in the queue.  Each ride is different, but so far anyway, each ride does not disappoint.

 

The Finance of Self-Employment

I have been self-employed as a consultant since 2008. I opted to go independent for a variety of reasons, primarily to afford myself more freedom in choosing  what work I do, and how I do it. I felt too restricted by corporate policies at my previous job. I worked for 11 years at a tech company on their Online Marketing department.

There were a number of financial things I had to learn after deciding to become an independent consultant. Going independent was initially daunting – this was my first venture into working independently. Thankfully I had some friends who were also working as independent consultants, who were able to share some of their experience with me. The first thing I did was to obtain an LLC in order to separate my business and personal finances. By “doing business as” my LLC instead of as myself, I reduce the likelihood of a client being able to sue me for all my personal assets; limiting the liability to just business assets.

Another financial consideration taxes – not only did I now have to think about the so-called “self-employment tax” (having to pay the full amount of the FICA / payroll tax, which previously my employer paid half of), but I also had to plan to pay quarterly estimated tax payments. Previously all my taxes were withheld from my paychecks by my employer. As an independent consultant, I now work as a 1099-contractor and my clients do not withhold taxes from what they pay me. I have to set that money aside each quarter or worry about paying a penalty during my annual tax return.

Between the federal income tax, state income tax, and FICA/payroll tax, I generally have to set aside 40% of my income to cover my quarterly estimated income tax payments.

Now after having to consider all that, the next thing I had to figure out was how much was I actually going to charge for my services, how I was going to invoice my clients and how quickly was I going to expect to receive payments. I have had to refine all these over the years  and finally have a good pricing model that all my clients seem comfortable with, along with a consistent payment model. For shorter one-time projects, I send an invoice upon completion of the project, with a net-30 payment expectation (which I’ve built into my consulting agreements with my clients). For longer-term / ongoing projects, I invoice on a regular basis – either weekly or monthly, depending on the client’s preference, with the same net-30 expectation. I prefer to have a relatively flexible invoicing model and not stick to a single, rigid model.

Finally, as I grow my business, I need to take into account how I am going to pay other people for their services. I have opted for a subcontractor model over an employee model for my business. My work and income is still too volatile to even consider hiring employees, and working with subcontractors on a per-project basis works far better with the current way my business works. I have also opted for a revenue sharing model, instead of a set hourly rate with my subcontractors. Since my current rates are still considered somewhat low for my industry, I am paying a higher revenue share (80/20) in order to get better quality subcontractors. Over time I plan to increase my rates and decrease my revenue share until I reach a revenue share that’s 60/40, but still guarantees a fair income to my subcontractors.

So as you can see, there are a lot of financial considerations with becoming self-employed. My recommendation is to find a good CPA (accountant) to help, especially with the tax side of things. If you can afford to also hire a bookkeeper (or find good software to help you keep your accounts receivable and accounts payable in order), do so. These can be critical to your success.

Entrepreneurship Books

Entrepreneurs have been recommending books for me to read to help my startup succeed.  The first was “The E-Myth Revisited” and the second is “The Lean Startup.”  Both offer interesting bits.  Personally, I find “The Lean Startup” more relevant to my business.

The interesting part is how the books conflict.  E-Myth says to have a very in-depth business plan down to the minutest detail — document everything and every process.  “The Lean Startup” basically says have a one-page business plan draft, but feel free to revise it often.

To avoid information overload I think I will limit myself to two entrepreneurship books per month.

The easiest way I’ve found to avoid doing entrepreneurial work is to read entrepreneurship books!

New Career and Lifestyle

My new routine:

• Get up whenever (9 am, 10 am, noon, 1 pm)
• Start coding
• Eat periodically
• Test code
• Research specialized mathematics
• Write notes, largely mathematical and/or statistical
• Do other non-technical business stuff
• Keep coding
• Go to bed whenever (midnight, 1 am, 2 am, 4 am!)

A few realizations:

• Coding seldom feels like work.  I like/love it!
• No one I know understands what I’m working on
  • Generalized risk-model portfolio optimization
  • Concurrent multi-risk model optimization
  • Convex and non-convex optimization
• The rare person who might understand likely works for the competition
• Math is fucking cool!
• My health is important.  I must exercise and eat right to fulfill my life goals.

In addition to kick-ass software development, I have adopted a fitness and “diet” lifestyle with help from my personal trainer and my wife.  For April I will be working out approximately 6 hours/week.  My current break-even (basal+) metabolic rate with 4 hours/week strength training is about 2400 kCal/day.  Under the new regime, I should lose 4-5 pounds of mostly fat in April. Then I will go back to a build and bulk phase were my weight stays constant, but my muscle/fat ratio increases.

My body-fat-percentage goal is about 14-15%.  My max bench press is currently 210 pounds, but I’d really like to hit 225-250.  I also wish to maintain symmetry… I want my other  keep my other strength progressions roughly proportional to my bench press progress.

4 to 7 hours per week of fitness training is my goal.  I find most work outs somewhat unpleasant, but not all.  However, I like the results.  The hardest part of my new lifestyle is the workouts.  The second hardest part is the “diet”… six balanced meals a day. Luckily, my work (a new career in financial software) is mostly joyful.

This is far better than 50+ hours a week in unsatisfying work in my previous career. All in all the change is wonderful, so far.

A Low-Silicon Diet

After 17 years in the semiconductor (silicon) industry, I am switching to software.  Why?  Many reasons, but one is worth blogging about.  I believe the long-term trend is economic contraction in hardware (silicon), and significant growth in software.

The trends I see are secular trends — a fancy way of saying very long-term. In fact the trends are just a continuation of the trends of the last few decades.  What ever you call it — hardware, silicon, or electronics — continues to be commoditized:

• DRAM becomes a commodity — 1980s.
• Storage (hard drives) become commodities — late 80s, early 90s.
• Chip-sets  — late 90s.
• Low-end graphics: early 2000
• Other sub-systems: Ethernet, audio, USB, PCIe, cable-modems, etc.  Early 2000s
• 64-bit computing — 2004
• Routers, Cable Modems — late 2000’s
• Mid-range graphics — late 2000’s, early ’10s
• SSDs — 2014

The transition from premium product to commodity is a continuum.  A premium product does not become a commodity overnight.  The premium just gradually decreases for a given class of products.  Another was of saying this is that profit margins gradually erode as competing products accelerate the “race to the bottom.”

Today some of the last hold-outs — high-performance, high-reliability computing, and high-end graphics — are showing early signs of diminishing premiums.   Some analog and mix-signal silicon commands premium prices too.  However, the overarching trend is towards lower profit margins.

This tectonic shift in silicon margins will create winners and losers.  Consumers, technology users, and software vendors will tend to be favored.  Hardware suppliers will tend to face headwinds.  Similarly, those who work in software-related fields will tend to benefit, while those working in hardware-related fields will tend to become stuck in a low-growth environment.

Commoditization is not the end of the road.   After all, oil is a commodity that makes billions of dollars per year for companies like XOM.   It simply means that gross profit margins for silicon are likely to fall from 60% to perhaps 30% in the next 5-10 years.

Overall, I expect silicon volume (units) to keep increasing, silicon revenue to modestly increase, while silicon profit and profit margins decrease.  The mantra of “silicon everywhere” is misleading, while the model of “cheap silicon everywhere” is quite apt.

Conversely, I see a brighter future in software, app, and web development.  Online retail revenue was about 6.5% in 2013, but the upward trend is strong. Hosting E-business in the cloud will become cheaper as hardware performance increases while hardware cost decreases (and hardware performance/Watt improves).  In this environment of healthy growth, software will differentiate; content will differentiate; and hardware will simply serve.

 

 

Why Exit Corporate America and a Six-Figure Salary?

My employer and I are parting ways after nine and a half years together.  It is an amicable separation, and I wish the [unnamed] technology corporation, and especially my soon-to-be coworkers the very best.  I am happy that the severance package is reasonably generous.

I feel a bit bad for my coworkers because they still face the same aggressive schedules but with about 30 fewer engineers.  However, the company is actively working to reduce headcount, and those left behind almost always bear greater burdens on their lives.  Sixty-hour weeks are not uncommon in the tech industry, and over the years I’ve endured the occasional 100-hour week. When that happens, breakfast, lunch, and dinner is brought in because there is no time to eat otherwise.

There was a time when I didn’t mind fifty- and sixty-hour weeks.  But that was when everything was new, exciting, and fun.  That was when I worked at the “old HP”, where almost anything was possible.  In the beginning I learned something new almost daily, and I love learning.

Here is why this “job separation” feels like a good thing:

1. Severance pay is a nice perk.
2. I believe my best talents are wasted in my current role.
3. There is virtually nothing for me to learn in my current role.
4. The is little chance of me moving to a significantly different role (within the corporation).
5. I will never get rich working for a large corporation, unless I build it myself.
6. Going to work feels like stepping into the Matrix.
7. True creativity is treated like the flu… people avoid it as much as possible.
8. I am willing to bet on myself and my talents!

I am passionate about creativity and I have largely refused to drink the corporate Kool-Aid.  Pretending to be a Kool-Aid drinker is extremely taxing, and feels disingenuous.

Creativity is more habit than raw talent.  Creativity can be exercised and developed, or it can be quashed and stifled.  Creativity is dangerous to boring people and their boring jobs.  In contrast, creativity is energizing to interesting and open-minded people.

I prefer to use my energy to improve the world in my own unique way, and with my own unique, somewhat flamboyant style.  I can relate from repeated managerial feedback that my style is not appreciated by former employer.  My style is friendly, lively, and centered around humor with a touch of sarcasm.  Liveliness, humor, and particularly sarcasm are not appreciated in my former corporate realm.  What passes for humor is so sanitized that any pre-existing wit is sublimed into the corporate HEPA filter of political correctness, anxiety, self-censorship and banality.  That culture is one reason this [unamed] corporation’s advertisements are so uninspired.

I am managing my own company now.  It is a start-up, and it is my passion.  It is being built around disruptive technology — technology that will make waves in the world of investing. Technology that few will understand, but which produces results that almost anyone can appreciate.  The culture of this new company will be based on a simple idea — be bold.

 

 

 

Extending my Time Horizon

I have been on my new work out regimen for about 3.5 months.  In this time I have increased my sustained energy (cardio) output by 40%, and can now bench press more than my own weight.  With a mix of strength and interval training I have begun morphing my body and my metabolism from a out-of-shape to somewhat in shape.  I expect to continue making continuing gains for about 2-3 months, at which point I expect my fitness to begin slowly plateauing.

Frankly, I hope to continue exercising — in one form or another — for the rest of my life.  According to my research, the level of exercise I am performing can, in the mean, extend my lifetime by about 3 years.  This, of course, means my financial planning needs to be adjusted accordingly.

Mostly these minor adjustment mean a slight increase in savings and a small increase in risk-asset allocation.

There is seldom a benefit without a cost.  My share of the cost for the family gym membership is about $60/month. I have also paid a short-term $1100 for 21 weeks of one-hour, one-on-one personal training.  After the initial period, I plan on going to a once-per-month personal training program.  This works out to about $1400 per year for the gym membership and monthly personal training.

However the benefits of physical fitness, both personal and financial are tremendous.  The most striking example is type 2 diabetes, which a largely preventable and potentially devastating disease affection millions of Americans.  According to this website, type 2 diabetes affects over 25% of people 65 years old and older.  Preventing this one disease alone, in my opinion, is worth the financial and time costs of maintaining and improving physical fitness.

Improved fitness helps prevent other diseases such as stroke and heart attacks.  Whereas fitness (and proper diet) are virtually guaranteed to prevent type 2 diabetes, improved physical fitness reduces the odds of, say, the devastating affects of stroke. But just like reducing the risk of a financial loss is valuable, so is reducing the risk of various diseases.

The Purpose of Investing

The purpose of individual investing boils down to two important objectives: 1) Being more confident in your financial future, 2) Attaining a bright financial future.  In terms of well-being the first objective makes one feel more secure and happier today, while the second causes one to be more secure and hopefully happier in the future.

In essence the purpose of investing derives from the goals of security, freedom, and happiness.  It is these goals that have got me hooked on “exercise religion”.  In the case of financial matters, I continue to save today, for a brighter tomorrow.  As regards fitness, I am similarly making investments of time and money to bolster my future health.

What I’m saying is that exercise is a form of savings — saving future cost of medical expenses, missed work, and unhappiness.  I’ve put a lot of work into building my financial future, and I will do what I have to live to see it.

Best Way for a Twelve-Year-Old to Learn Finance: My Paperboy Job

By the time I was 12 years old I knew more about finance and budgeting than most 20-year-olds.  I had started delivering papers at age 11 and had accumulated a lot of experience by the time I turned 12.  One of the older kids in the neighborhood had out-grown the paper route job, and my friend Alan I and I decided to share his route when the older kid “retired” from the newspaper business.  Alan was 12 and I was just 11 — making me one of the youngest paper boys in town.

The route was long, spanning about 4-5 miles, and hence came with a long-distance premium paid every month.  Alan and I alternated delivery weeks which included afternoon delivery Monday through Friday and early morning delivery on Sundays.

The best part of the job was afternoon delivery in the summer months.  I seldom minded the heat and I enjoyed riding my bike around the neighborhoods.  The worst part of the job was collections.  Most subscribers paid by mail, but some paid directly to the delivery boys.  For them, I would have to knock on their doors and ask for their monthly subscription fee.  Since many paid in cash I had to make sure to have enough cash on hand to make change.  I found that some people were very prepared to pay, while others said they did not have the money and “could I come back tomorrow?”.   The worst was when tomorrow never came.  The missing money temporarily came out of me and my partner’s pay.  Only when the adults in billing got involved and the situation was rectified did Alan and I get our missing pay — and this could take a couple weeks. We pre-teen kids served as the bank floating interest-free loans to the newspaper!

A bundle of about 50-60 papers was dropped off at Alan’s house every afternoon (or Sunday morning).  On rare occasions there would be one too few papers dropped off.  This meant that I had ride an extra two-mile round trip to the nearest store to buy a copy to replace the missing paper.  I would report the missing paper and get reimbursed for the cost of the paper — but not for riding an extra two miles.   Another lesson — sometime you just have to take on extra work to keep your customers happy.

I was getting first hand exposure to revenue, earnings, “one-off” financial events, and accounts receivable.  I learned that some customers paid on time and others were often tardy.  Occasionally some were generous and even tipped!   Those that paid my mail would sometimes leave a tip, especially around Christmas time.  All of that had to be accounted for because Alan I shared the tips.  Sometime the tips were gifts, rather than cash.  Alan and I divided the cash, be kept the non-cash gifts we were given.  We were both very fastidious about our finances, and I don’t recall ever having a conflict or dispute between us.  We were honest and meticulous and it paid off in a good working relationship.

I had a savings account and interest rates were around 5 percent.  I was eager to get my money in the back to start earning interest on it, and I’d go with my Mom to the bank to make deposits.  (I think her main reason to go to the bank was to deposit my Dad’s paychecks).  I was fascinated with the idea that after two months I would earn interest on interest (in addition to interest on my savings).  After three months I’d earn interest on my interest’s interest’s interest (even though that amount might be less than one penny).  I was paid interest monthly and always looked forward to my monthly bank statements.  I also wondered about the possibility of daily interest, hourly interest, etc.  I only learned later that my musings had touched on the mathematics of fundamental financial concepts such as compound interest, continuous interest, opportunity costs, and discounted future cash flows.

Looking back, I see that my paper route taught me a great deal about money and business.  It also helped me develop a strong work ethic. In many ways it is a shame that the job of paper boy or paper girl is pretty much a relic of the past.  So many lessons not being learned.  It seems that there are fewer and fewer opportunities for younger kids to work, earn money and learn important life skills at an early stage.  Nonetheless there are some young entrepreneurs who are finding real information-economy jobs on the internet, for example.  Times change and so do opportunities to learn and grow.  And that rate of change appears to be accelerating.  We live in interesting times.