THINK LONG-TERM, REWARDS ARE GREATER!
It was a sunny chilly morning in December in Hemet, California some 30 years ago.
I can still see myself, sitting there in an unassuming yet comfortable office chair next to a modest wood conference table.
I remember being proudly dressed in my new navy blue suit, white shirt, and paisley tie, sitting across the table from Steve Temple, the City’s Finance Director. I could feel the warm air gently swirling up from the heating vents of the office, embracing me with a sense of security and giving me optimism about the future.
As a 27-year old recent Latino born in a farm labor camp who traveled throughout California following the agricultural crops with my family, I was here now facing a career in a local government with ultimate enthusiasm.
You see, this scene I just described is from 1990, when I was newly-hired as an Administrative Analyst at the City of Hemet with zero experience in local government.
But I was recent graduate from San Diego State University (SDSU) with a degree in Business Administration (emphasis in Finance) with lots of work experience from everything from mowing lawns to washing dishes to running my own bookkeeping business during college.
So I felt so BLESSED to have this great career opportunity. You might even say I felt like Cinderella with only one shoe, and the missing shoe (this City job) was made just for me!
But really, I felt blessed and SO grateful!
You might say, “hey dude, stop bringing up your tough story of growing up poor”, but I respectfully tell you, “NEVER FORGET WHERE YOU CAME FROM”. Otherwise, you could lose your empathy and love for people who are in the same situation you started out.
Anyway, in 1990, I had been married to a wonderful woman for 4 years, and already we had two beautiful daughters and a precious son on the way.
Yes, my life was good.
As I sat in the chair waiting for Steve to speak to me, I quietly thanked God for this blessing.
I sat directly in front of Steve, looking directly at him with a modest smile.
I was exceedingly grateful to be allowed to experience this very special moment in my life, a time that I would never forget.
When I noticed Steve was almost ready, I then sat up eagerly at the edge of my chair, smiled, waiting to hear the first words of wisdom from the mouth of this man who would be my boss, my supervisor, and my mentor for the next 5 ½ years of my career as a municipal employee.
Steve brought out his planner and his notes, then he said, “Welcome to the City of Hemet John. I hope you have fun in your new job as Administrative Analyst. Think long-term about your career, put as much as you can into our 457 (deferred comp) plan, and save all you can for your future. Your retirement will be here before you know it”.
It was Steve’s words to me about “thinking long-term about my career” that made the most impact in my life.
Today in 2020, I sit here recounting the words of my beloved former boss Steve Temple, words he spoke to me 30 years ago!
I little shout out to my mentor Steve Temple: Thank you, Steve for all your words of wisdom and mentoring during my five years under your tutelage. May you enjoy another 30 years of fly fishing, good health, and success giving back to the communities you are likely still serving. I now too understand the meaning, “A trout is a moment of beauty known only to those who seek it”.
Back to my CitySpeak podcast…
Today I am passing along the wisdom I learned from Steve and other local government leaders I met on my 30-year journey as a City Finance Director.
Here’s the point of this CitySpeak episode: Think long-term, the rewards are great!
In today’s CitySpeak podcast, I present three (3) important benefits we can all enjoy from “thinking long-term”… about our careers, our relationships, and our life in general.
Here they are as follows:
1. Long-term thinking… allows us to weather economic recessions like any planned event.
2. Long-term thinking… is smart, short-term thinking is not smart.
3. Long-term thinking… gives us greater health, wealth, and happiness.
I – LONG-TERM THINKING ALLOWS US TO WEATHER ECONOMIC RECESSIONS AS A PLANNED EVENT
ECONOMIC RECESSIONS ARE NOT A RESULT OF BAD LUCK, “PLAN” FOR THEM IN CYCLES
My grandfather reminded me constantly, saying, “A prepared man is worth two”. And we have all heard the general definition of “luck”, right? It says, “Luck is what happens when preparation meets opportunity”. Also, another saying, “Good luck is the result of good planning”. Lastly, I like the saying, “The harder I work, the luckier I get”.
There are many, many more sayings I could quote, but they all have the same theme, “Plan long-term, work hard even when nobody is watching, and good things come to those who wait”.
In today’s CitySpeak podcast, I’m taking these sayings and adding a twist to make it my own, and here it is: “Think long-term about everything you sow or plant and you will reap proportionately”.
What do I mean by this? Basically, you reap what you sow. Here’s an example of what I mean.
AN EXAMPLE OF SOW/PLANT WITH A LONG-TERM VIEW TO REAP PROPORTIONATELY
Today in 2020 we’re facing the worldwide COVID-19 pandemic, and this is one cause of the economic downturn we’re all working through. Even if you didn’t plan well for today’s economic downturn, plan for a 12 to 36 month financial recovery. This means that you will DO WHATEVER IT TAKES to restore your basic financial needs, plus position yourself (and those who depend on your for sustenance) to not only survive the next 12 to 36 months, but THRIVE when we see ourselves out of this COVID-19 recession.
If we come out of this recession sooner than 12 to 36 months, super. But you will have planned for worst-case scenario, which is what I personally feel is needed given the massive economic uncertainty I see from my vantage point.
II – LONG-TERM THINKING = SMART / SHORT-TERM THINKING = NOT SMART
ANYBODY CAN MAKE SMART OR NOT SMART DECISIONS
I can’t be politically correct about smart vs not smart decisions. Anybody can make smart decisions (through long-term planning) and not smart decisions (through short-term planning). And we usually know when we’re making decisions that are not smart when we defer saving for the “rainy day”, defer maintenance of fixed assets or durable goods or capital infrastructure, and even defer long-term investments to allow us to enjoy short-term satisfaction.
Smart decisions require “discipline”. In the case of individuals or local governments facing this economic downturn, it was “financial discipline” that was needed to prepare for this economic recession.
We can blame COVID-19 for all of our economic woes, but that would not be honest. Our American economy has been running the riskiest fiscal and monetary policies in our modern history.
YOU DON’T NEED AN ECONOMICS DEGREE FROM AN ELITE COLLEGE TO SEE THE PROBLEM
This is not a political statement. This is an academic statement based on the economics and business education I received from the California State University system in my undergraduate and graduate programs.
You don’t need an elite-school education to advance the academic models that show that the more debt an entity takes on (from overspending), whether an individual, business, or a government, this will raise the fiscal stress on their fiscal capacity and budget of the entity, as well as raise the risk of bankruptcy.
We knew this recession was coming.
If long-term financial planning was an important part of our decision-making process (as individuals, businesses or even government), we wouldn’t care that our economy fell into a recession in 2020, 2021, or whenever.
There’s plenty of Harvard MBAs and University of Chicago economists out there who can craft language to justify any side of the economic debate, but in the end, they KNOW that running deficits, printing money, and going into debt is simply another example of “kicking the can down the road”.
And what an incredible distance the 2020 economic can has been kicked.
WHO CARES ABOUT ECONOMIC RECESSIONS?
So I am reiterating my point, recessions happen. If we’re PREPARED FOR economic recessions, who cares when the next comes?
You want to know who cares about economic recessions? Those who were betting on continued economic expansion, taking financial risks to enjoy short-term rather than planning and saving for the long-term.
After over 10 years without a recession, many forgot that economic recessions are cyclical. These recessions used to happen every 5 years, which may be the reason many forgot to plan “long-term” for an economic downturn that we know is bound to occur again after 10 years of economic expansion.
We want to continue to take a long-term view of our all our decisions, not just of a financial nature. The rewards to us are greater when you take a long-term view in your planning.
THE LONGER YOUR GOAL TAKES TO COMPLETE THE GREATER THE REWARD
Some people choose educational goals that take less time and effort to complete, not realizing the rewards from that education will not be as great. There’s nothing wrong with a short-term academic program, especially if that education leads to a job or career that you love to do.
But NEVER choose an academic goal or career path just because it’s easier or it takes less time to complete. You may be happier in the short-term, but in the long-term you will always regret you did not pursue the academic or professional goal that you really wanted.
I remember when my and college mates and I were studying Statistics and Calculus for Business, which was rigorous coursework required to prepare for the quantitative exams for acceptance into SDSU’s College of Business. This quantitative exam was a way to weed out some of the excessive number of SDSU students trying to get into the College of Business. You see, the College of Business was an “impacted” degree program at SDSU, meaning there were a lot more students wanting to get into the program than there was space available.
Because we were not Math majors, Calculus for Business and Statistics were very challenging courses to master. Two students from our group gave up on passing the quantitative exams and “convinced” themselves that they preferred Economics or Public Administration as a major instead of Business Administration, simply because of this relatively minor obstacle to overcome.
There’s nothing wrong with a bachelor’s degree in Economics or Public Administration, however, to give up your goal to obtain your degree in Business Administration was worth whatever sacrifice to achieve.
These two school mates were simply not thinking “long-term” about the benefits of doing WHATEVER IT TAKES to get accepted into the College of Business to realize this degree objective at SDSU.
I urge all of you out there…NEVER choose a course of study, job, or career just because it seems easier or it has seemingly difficult obstacles to overcome. In the end, you will regret it and you will either live your life unhappy, or you’ll have to go back later when you’re older. And although it’s never too late to do it, it will be harder as you get older with added responsibilities or other circumstances.
WHAT YOU WANT TO DO TODAY, PLAN TO GET IT DONE NEXT YEAR…SAID MY CITY MANAGER
I want to share the words of wisdom my Interim City Manager Lyle Alberg gave me in 1995 when I was the Finance Director at City of San Jacinto. I’ve told you about Lyle, right? So I won’t go too much into his background, other than to share one lesson Lyle taught me as a first-time Finance Director (he taught me lots more, but that’s for a future CitySpeak podcast episode).
Lyle said, “What you want to do today, plan to get it done next year”. This was an example of taking short-term goals and making them more long-term for reasons that become obvious after you’ve had a couple years experience as a municipal Director.
As a first-time Director at City of San Jacinto, I had so many ideas to improve my Department and the organization. With my new powers and authority through the Office of the Finance Director (read your municipal code to learn more), I had the opportunity to say and do a lot more than I was able to do as Administrative Analyst at City of Hemet.
So Lyle tried to give me a reality check, realizing that I was ambitious and an over-achiever. He said, “John you don’t try to do too much in your first year as Director. You need to take time to survey the organization, get through this election of the new City Council members, and then take time to ponder the broader impact of the administrative initiatives you are wanting to propose to the organization”.
These were wise words. I understand now why Lyle said, “What you want to do today (short-term), plan to get it done next year (long-term)”. May you rest in peace Lyle Alberg.
And you know, long-term planning is not just to weather economic forecasts or to make smart decisions. No, long-term thinking is for better health, greater wealth, and happiness.
III – LONG-TERM THINKING RESULTS IN HEALTH, WEALTH, AND HAPPINESS
Anytime you want to wish people well, what better words to say than, “Wishing you abundance of health, wealth, and happiness”. That’s the most encouraging thing you can say to people today, especially in light of this time of global Coronavirus pandemic, and global economic recession we’re now living through, taking away the happiness from many people in the world.
These well-wishes are especially significant to people who did not ever think another global pandemic like the Spanish Flu from 100 years ago would occur again in our lifetime. We are all suffering from this Coronavirus pandemic, but it will be over soon.
For now, keep in mind that those who invest long-term yield greater results. This is just my opinion based on my nearly six decades of live experience. I would love to hear your comments too.
As we conclude, these are three most important benefits I see from long-term vs short-term decisions:
IMPROVED HEALTH…FROM LONG-TERM THIKINKING
This is basic, but if we eat pancakes and bacon every meal of every day of our life, we will likely suffer poor health, lower quality of life, and even a shorter life. Of course, I will not give up my carnitas burritos, my posole, my menudo, or my mole de pollo, but I just can’t eat these foods every day. And I’m trying to add more salads and fruits into my diet. At 57 years old, my body is telling me what I need to do, but thinking long-term, I know I can’t eat like when I was 27!
Funny movie quotes are applicable here.
In the 1991 movie “City Slickers”, Phil Berquist tells Mitch Robbins, after the trail boss Curly dies sitting up, “The man ate bacon at every meal…you can’t do that”! Also, in the 1994 movie “The Flintstones”, Barney tells Fred who is eating a huge drumstick, “You know Fred, they say eating too much red meat is bad for you”. Then Fred answers, “what a load of bum. My father at meat every day of his life and he lived to the ripe old age of 38”!
This may be funny, but the sad reality is that if we think short-term, indulging (or rather overindulging), we will not enjoy improved health or even good health as we age.
Exercise is also important.
On New Year’s day I made a resolution to lose 50 of the 250 pounds I’m carrying on my carcass. Many tell me I carry it well, but I still want to get back to 200 pounds, a weight I have not seen on the scale for a long time!
Ten months ago I ran the 5K “Viva La Resolution!” race to kick start my ambitious goal. I received a medal where I wrote down my “Finally drop 50 pounds” goal. I’m down 16 pounds as of mid-October 2020, so even if I don’t reach my goal of losing 50 pounds, I’ll be happy if even I lost 25 pounds.
But what about wealth, can we enjoy greater wealth from thinking long-term?
GREATER WEALTH…FROM LONG-TERM THINKING
Yes! We can enjoy greater wealth from thinking and planning and taking action with a long-term view.
There is something only the rich and the banks fully understand: Compound interest and Exponential Growth. If the average person could understand compound interest and exponential growth, this would result in the rich bankers having to work harder for our money!
Compound interest and exponential growth basically means that you do not see the “real impact” on the numbers in the short-term. It takes 10, 20, or 30 years to REALLY see BENEFITS
Case in point, let’s say you have taken out a mortgage to buy a house, or even a car, but you see the REAL POINT when you’re working with larger numbers, like the price of a real estate purchase.
If you and I are short-term in our thinking, we will look at how much of the monthly payment goes to principal, reducing the total loan amount that you borrowed.
Let’s say in October 2020, you borrow $300,000 at 3.5% for 30 years to buy a house. The monthly payment will be $1,347.13, which means you are paying an extra $513.80 a month (on average) for interest throughout the 360 months of mortgage payments you will make (30 years x 12 months). However, you will be paying a lot more than $513.80 a month towards interest
It will take 196 months of monthly mortgage payments before you reach the $513.80 “monthly interest cost”. In fact, when you start making your monthly mortgage payments, out of the $1,347.13 monthly mortgage payment, almost $900 a month will go to interest, which means less than $450 of your $1,347.13 monthly payment will go to pay off the $300,000 mortgage loan.
It is not until you get to December of 2030 that your $1,347.13 monthly mortgage payment reaches the 50/50 mark, which is 112 months of payments, when 50% of the payment goes to interest and 50% goes to principal.
It helps to show a visual presentation of the interest/principal mortgage payment schedule to show you how short-term, there is little benefit (paying off the mortgage loan), but if you look long-term, then you’ll see the real benefits (principal payoff in this case). Click on the visual presentation here: $300k Mortgage Chart
The same presentation would be true for investing (only in the opposite direction) than when you are borrowing.
If you take a long-term view of investing, you would not want to look at the investment balance of your accounts on a “daily” basis. That would be the “not smart” short-term view.
You won’t see the benefits from investing if you look at the balance daily, weekly, or monthly. It’s like putting a drop of water in a glass. If you put a drop of water in the glass, you will not see any substantial increase. Only after hundreds or thousands of drops of water, only then will you begin to see the glass fill up significantly. Remember, there are 365 days in a year, so a drop of water a day is 365 drops of water. In 10 years, the total is 3,650 drops of water, and this does not even reflect the compound interest factor and the power of exponential growth.
Even small personal investments of $50 or $100 a month, or whatever you are willing to sacrifice from short-term use will result in strong future value investments in the long-term benefit.
With compound interest and the powerful engine of exponential growth, the $50 or $100 can grow into significant future value, again, if you think long-term in your investment decision.
It will take 10 years or longer to really see the benefits from taking the long-term view. Steve Temple knew this in 1990 and he’s enjoying the fruit of his labor wherever he’s now fishing and living. I’m glad I took his advice. I would be happy to show you how the long-term investment picture looks if you email me at John@munitemps.com or go to www.MuniTemps.com if you want to obtain all of my contact information.
But in then end, neither good health or greater wealth matter if not accompanied by greater
GREATER HAPPINESS…FROM LONG-TERM THINKING
There is ultimately greater happiness in giving than in receiving. But we won’t have much of anything to give if we don’t make prudent and sound decisions with a long-term view.
Let us consider the benefits of long-term thinking as we discussed in today’s CitySpeak podcast.
As we discussed today, long-term thinking and planning and decision-making, taking action to look to accomplish our goals in the future, even the “not so distant” future, will result in greater rewards.
This will allow us to weather any economic recessions, and by thinking smarter (long-term), we can achieve improved health and greater wealth and happiness in our personal and professional lives.
Let us hang in there, and let’s keep planning with a long-term view.
This is John Herrera from MuniTemps.com and the CitySpeak podcast and video blog.
See you again next time!