People helping people. Powerful stuff.

Dear Baby-Boomers….

I read an article at one of my favorite websites (www.businessinsider.com) titled, “Here’s The Real Reason Why Millennials Are The Most Stressed Generation”.

I am proudly a part of this millennial spectrum (albeit on the “older” side of it). Thus, I took offense to this article. So, just once, I want to take a stab back…

The real reason why millennials are stressed? Because we know we’ll have to clean up the mess the baby-boomers have created. By definition, we (by we, I mean, collectively all young people) haven’t been alive long enough to damage our society to begin with.

So next time you read another article bashing young people for our immaturity, lack of employment, huge debt, and irresponsibility… please try to remember who really created the environment that put us here.

Thank you,

Millennial Soap Box

Comments

The first step to creating a personal budget is also the most important…

I read a lot of articles about personal finance with titles like, “The top 5 Money Saving Tips”, or “Finance 101: How to create a budget” or “Stuck in a money crunch? Follow these 10 steps for a Personal budget”. 

Most of the articles provide really great advice. They talk about what steps to take, strategies to implement and how to create goals for yourself. I think for the average person, it is really difficult to create and maintain a budget. Whether it is how they were raised or fear of numbers, most people are not comfortable managing their own money in a proactive manner. These sites really do seem helpful.

With all that being said, in my personal experience/opinion, there is one area that I believe is grossly overlooked in every self-help personal budget I come across. And that is summed up with one question. How do you know what direction you should be going if you don’t know where you are today? Stated differently, where do you spend your money today? The easy expenses are always the items we gravitate towards first. “Oh, my car note is $300, rent is $1000, cable/cell/internet is another $150…” and etc. Fair enough. I always believe the devil is in the details…

How much did you spend on groceries last year? What about restaurants (yes that daily Starbucks trip too)? Hmm, better yet, how about those annoying items like oil changes and new tires? Don’t forget about birthdays, holidays and gifts every year.

Pretty tricky to manage right?

This is no easy task. It’s the hardest part of budgeting but also the most critical. My advice is to accurately track every penny spent (at least) once every 3 months. At this granular level of “tracking”, it is not a matter of ensuring you capture all the dollars spent (although that is still very important); it is that you will actually start to correlate your decision making with their financial impacts. This is the best way to change spending behavior. Too often people do not connect their many small decisions with the impact on their overall financial picture. Doing this “tracking” helps connect the dots.

But guess what? I have not mentioned one word about planning. During this time of getting familiar with your current spending, DO NOT PLAN. Become accustomed to tracking where your money is being spent. Do nothing else. Crawl first, walk later. (Now of course, if you are filing for bankruptcy and the bank is foreclosing on your house, obviously this message is not meant for you. Sorry.)

The very first month I got serious about tracking my personal spending, I was utterly shocked at the amount of money I spent on food, video games, and well… crap. I was spending almost 1/3 of my paycheck on groceries and eating out. Do not get me wrong, I really enjoy food and drinks with friends in social settings. But wow, I never realized I dedicated so much of my money this way. But once I started tracking my spending, I could slowly start to see how my decisions (i.e. going out to pint night at Taco Mac every Thursday) were impacting my overall ability to save money. 

You must know where you spend your money. Down to the damn penny. That sounds excessive, but with today’s tools you really have no excuse unless your personal mantra is “ignorance is bliss”. Balancing check books is lame even for a numbers lackey like myself. There are some awesome, free tools out there. Mint.com is one of the best free financial planning/consolidation tool out there. What Mint.com aims to do is consolidate all your financial accounts into one snapshot. (I’m a stickler about privacy and Mint.com passes the sniff test on that front as well. Otherwise, I would not use them.) They can pull transactions from your bank accounts, debit card, credit card and even loans and investments. They even go one step further and take a best guess on the nature of the transaction and put it in a category for you. So a credit card transaction to “Gas South” will automatically be marked as “Gas Bill” which is a sub-category under “Bills and Utilities”. These transactions all get labeled and consolidated into a pretty summary for you. (They do awesome budgets and goals too.)

BOOM!! Now you can be ashamed of all the naughty spending habits you always knew you had but were too afraid to confront. Give it some time and start tracking. Congratulations, you are now on your way to financial independence. If I can keep up on my goals for this year (which includes blogging consistently), I will be following up with some helpful next steps to a personal budget. Look out!

DISCLAIMER:

You may be thinking, “Well hey, you’re a financial analyst, no wonder this comes easy to you!”. This is partly true. My professional background and experience forces me to be more attuned to these things than the average person. But you are kidding yourself if you think professionals in the accounting and finance industry (myself included) do not have “money problems.” For example, I believe it is way more dangerous that I know exactly how much money I spend and I eventually become numb to those figures since I deal with large sums of money on a daily basis. I am still a normal dude (most of the time) compelled by the same desires as anyone else.

In case you do not know anything about me yet, I work with numbers on a daily basis. I analyze, budget, manipulate and streamline all sorts of data (I even do fun projects on the side like this one). Typically that involves pushing around Benjamin’s in a spreadsheet for the company I work for. So I try to read everything and anything dealing with finance that I can get my hands on (personal, banking whatever) 

This does not by any means make me an expert on personal finance. As a matter of fact, let me go ahead and state this explicitly: you should not, by any means, ever take information I may, or may not, directly present in this blog post, or any blog post, as financial advice. I doubt my advice would bankrupt you; however if you do go bankrupt or have some ill-fortune, it’s your own fault. I am merely speaking from my own personal observations and experiences. And yes, I sound like an annoying brat who is trying to mitigate some imagined liability. Yes I am that guy. See you next time.

Comments

My Take on Online Privacy Policies

There has been a lot of noise surrounding Google’s new privacy policy. There’s been a lot of coverage on this and Google has done a nice job of responding, Kudos to Google. In my book, transparency is always the best route.

For probably 98% of you, changes in privacy policy (for any company) mean little to you and this change will be a non-issue. You probably love all their products. You will continue using Google’s products and services the way you always have. If you are one of those people, feel free to stop reading now.

I will be the first to admit, I’m a bit of a privacy nutcase. I want to be invisible while I’m ‘surfing the net’ if I so choose. (Thanks to private browsing on Firefox and other browsers, this is now possible.) I also want companies to be up front about how/when/where and with whom they share my data. I also do not want those policies to change once I have committed to their service. Because I worry enough about these issues, I know I will delete content/history, or reorganize my “circles” or “groups” simply because a privacy policy has changed. Yes, I am that guy and yes I hold a very high standard. I know I am in the minority on this one.

It is the last point that I have the most issue. I came to your service for a reason. It was cool (YouTube), it helped me connect to friends (Facebook) or it solved a real world problem (mint.com). In almost every scenario, these offerings were free! Awesome! Who doesn’t love free? Second, they all started with absolutely ZERO advertising. Which was another plus. I hate being marketed to unsolicited (another weird pet peeve of mine). Also, it clutters the screen space, which in turns creates a worse user experience. But I get it, they gotta make money off me somehow, right? Fair enough.

For me, the hiccups happen when privacy policies are modified. I find it a little concerning when Google, Facebook, or any company would go out of their way to change privacy policies that modify how they collect my data in the name of delivering more valuable information to advertisers and in turn generate more advertising revenue. Notice I said, “more” information. Because guess what? Some online companies already know waaaaaay too much about you. And yes, they won’t say it exactly this way, but they need to sell this information to make money. This guy’s blog post does a great job of summarizing how much Google can potentially know about you. We all know that FB knows your life story. They changed the profile page into a Timeline, enough said.

So you may be asking, “Dude, what’s the big deal? What are you so paranoid about? Don’t get your panties in such a wad! It’s not like anyone is going to nuke your house. No one cares about your online activity except you!” You’re probably right. It’s about principle.

I freak out because I view the internet as an extension of real life. It has enhanced my real life in ways no one thought possible 30 years ago. I can stay connected to people all over the world. I can transfer money in seconds. I can share my idiotic thoughts to whoever does (or doesn’t) listen. It takes what can’t be done in a physical setting and extends that experience virtually anywhere. However, I simply want to hold the web to the same standard as those real physical scenarios (and maybe I shouldn’t, which may be my problem).

I will close with this example; imagine you go to a mall to do some shopping for a loved one. You are stopped at the front gate because you first check-in to the mall with a membership ID. No worries though, it is a free membership after you provide the generic information (name, address, phone number whatever). C’mon, at least they  grant you access to the stores! You walk in and while browsing the many stores, the mall records you at every stop. First, Macy’s then JCPenny’s. The list of items you look at is also documented. Perfume at Macy’s and KitchenAid mixer at JCPenny’s. You break for a minute to view some videos at a store. You laugh at one of the funny clips from Wedding Crashers and stroll along. As you leave, you pass by one of those vendors that sells flying helicopters and quickly leave. You’re distracted by the railroad cars instead. Time for food! You grab a slice from Sbarro’s.

Along with your membership ID, and your recorded browsing history, the mall decides it wants to make this experience even better for you. After all, they could probably help you faster than you can help yourself. So the mall quickly runs some calculations based on what they’ve been tracking. After 30 minutes or so, they have a pretty good picture of why you’re here. The mall sells this information to the highest bidder, er, I mean most “relevant advertisers”, and suddenly vendors approach you simultaneously. Discounts on comedy DVD’s from an electronics store, coupons for pizza from someone dressed as Mario and Luigi, perfumes worn by super models, and a cooking show host using Kitchen-Aid products. Wow, you realize some of these offers are pretty dead-on! Even offering a toy railroad set for your son’s birthday next week which they pulled from your phone’s contact information. But now you’re a little concerned too. Can you stop the mall from tracking its traffic? The mall says sure, just opt-out of mall tracking next time.

Yes, I realize that example a little extreme. But this is why I “freak out”. In my mind, this is exactly how shopping happens on the internet. What are your thoughts? Am I really as weird as people tell me or do I bring up any valid points here?

UPDATE: There are articles like this one from Forbes.com that do nothing but reinforce my queasiness surrounding online privacy.

Do you wanna know, “what they know”? Wall Street Journal has put together an awesome interactive tool that displays how you’re being tracked and by some of the largest websites and which companies your data go to as a result. Check it out.

Comments

Zynga’s (awful) non-GAAP measures

Zynga recently announced quarter and year end results. This was an important one. This was the first earnings announcement after going public; it also wrapped up their fiscal 2011. They were able to edge out Wall Street expectations but set the bar pretty low for 2012. See the coverage by Business Insider for more information.

One thing I HATE about the accounting/finance world, is how complicated it is to report GAAP results (GAAP is an acronym for Generally Accepted Accounting Principles). Zynga’s 8-K filing is a perfect example of how laws make financial reporting a chore for public companies to measure success. Zynga cannot simply report GAAP results. Why? Because the results look AWFUL on a GAAP basis. Yes, GAAP is the standard to compare any/all public companies. It is the divine “apples to apples” standard.

On a GAAP basis, Zynga reported net loss per share of (1.22) for the quarter and (1.40) for the year. On a non-GAAP basis, Zynga reported net income of $0.05 and $0.24 per share for the quarter and year respectively. Confused about why they are able to do that? Me too.

Zynga (like many, many companies) decide which items they wish to exclude from their GAAP results in order to provide investors with reliable metrics to track the financial success (or failure). Companies call these “Adjusted Earnings” or “Non-GAAP” measures. Essentially, Zynga management can exclude anything they feel will help illustrate the company’s performance. (Why it is called GAAP, I’ll never know. Obviously with so many companies using “Adjusted Earnings”, GAAP is not “Generally Accepted” by anyone but accounting professionals…) My ranting can not illustrate this well enough. See below for Zynga’s GAAP to Non-GAAP comparison:

Here is a description the non-GAAP measures Zynga uses and their limitations (from Zynga’s 8-K Filing):

Some limitations of bookings, adjusted EBITDA, non-GAAP net income, free cash flow and non-GAAP EPS are:

 -Adjusted EBITDA and non-GAAP net income do not include the impact of stock-based compensation ;

 -Bookings, adjusted EBITDA and non-GAAP net income do not reflect that we defer and recognize revenue over the estimated average life of virtual goods or as virtual goods are consumed;

- Adjusted EBITDA does not reflect income tax expense;

- Adjusted EBITDA does not include other income and expense, which includes foreign exchange gains and losses;

- Adjusted EBITDA excludes both depreciation and amortization of intangible assets, while non-GAAP net income excludes amortization of intangible assets from acquisitions. Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future;

-Adjusted EBITDA and non-GAAP net income do not include gains and losses associated with legal settlements;

 -Free cash flow is derived from net cash provided by operating activities less cash spent on capital expenditures, and removing the excess income tax benefits or costs associated with stock-based awards;

 - Non-GAAP EPS treats shares of convertible preferred stock as if they had converted to common stock at the beginning of each period presented;

- Non-GAAP EPS gives effect to all dilutive awards outstanding, including stock options, warrants and unvested restricted stock units that were excluded from the GAAP diluted earnings per share calculation. See non-GAAP EPS reconciliation for further details ; and

- Other companies, including companies in our industry, may calculate bookings, adjusted EBITDA, non-GAAP net income and non-GAAP EPS differently or not at all, which will reduce their usefulness as a comparative measure.

Because of these limitations, you should consider bookings, adjusted EBITDA, non-GAAP net income, free cash flow and non-GAAP EPS along with other financial performance measures, including revenue, net income and our financial results presented in accordance with GAAP.

Alright, before an accountant starts beating me to death about preventing another Enron from happening; standards, laws, and regulations are absolutely required to ensure every public company reports consistent earnings to protect investors. I get all that. If you want to raise capital via public offering, it’s part of the rules of the game.

But at what point does reporting become a bit ridiculous? Yes, we absolutely need a standard to compare Zynga to any public company. I totally understand that. BUT (and it’s a big BUT), Zynga must report non-GAAP results. How else are investors supposed to track Zynga’s progress? GAAP does not do investors or Zynga any justice. (For example, Zynga generated positive cash flow and has over $1.5B in cash on the balance sheet. They must be doing something right…)

Zynga’s business is not the same as Google, Microsoft, or even Facebook. It’s not a manufacturing company like Ford, GM, or Daimler-Chrysler. It is not even close. The basis for measuring these companies should not be the same either.

What is the measuring stick for technology companies? Who do you think should decide what’s in vs what’s out?

Comments
Comments