Act Your Wage

Dave Ramsey has a great saying: “Act your wage”. In layman terms, this means live within your means. Our post-modern society has concocted a variety of ways to allow us to do just the opposite.

Just because you can Doesn’t Mean you Should

When I applied for a mortgage, I was pre approved for 1.5x what I wanted to spend to buy a home. Good monetary habits require you to do research. Asking how much house you can afford before you take the highest number you are offered can save you many headaches down the road. When you think that creditors have your financial security in mind, you can be tricked into thinking you have more means than you do. In slang, you act above your wage. You could quickly find yourself strapped for cash when the bank told you you could “afford it”.

Interestingly enough, when I looked toward buying a car, it was even worse. They approved me for a loan three times as large as what I needed to buy the car I wanted. Enough money to put a down payment on another home! Obviously, I spent no more than I intended to, but the thought of having a car the price of a down payment on a house is absurd.

Don’t Keep up with the Joneses

The “average” American is saddled with debt of all kinds. Most notably a mortgage. Most financially savvy people would agree that this is a good and almost necessary form of debt. The average non-mortgage debt in 2018 was a whopping $38,000! So as you can see, many of your neighbors who you think “make a lot of money” or “are doing really well” are in fact not doing well at all.

Acting your wage means knowing that you can enjoy the finer things in life, but only after you have attended to the necessities. There are lots of great rules of thumb for how much money to save and spend depending upon your stage of life. I have even written about it. Find reputable (hopefully financial independence oriented) advice, and stick to that to start. Unfortunately, our current financial system does not have your best interests in mind. Thanks for reading!

Advice for Times of Stagnation

Life presents us with many challenges. Some of them are of our own making, and some of them we have nothing to do with. We all feel at times we should give up. We think we should stop following our better eating patterns, slack off in our work, or stop saving money. Most advice about why you should keep going even in the face of setbacks is sentimental rather than logical. Meaning, once the feeling of motivation runs out, we have a good excuse to quit. There are, however, logical reasons that we can remind ourselves of that can keep us working toward our goals. Effective advice for times of stagnation can help us remember underlying principles and stay the course.

Changes can Happen at the Micro-level

When we embark on a new journey, we actually begin to change for the better the instant we decide to do something. Whether we know it or not, connections are being made in our brains to aid us in achieving our goal. That being said, visible and measurable changes take time to come about. A person who begins working out doesn’t see results after the first week, or even the first month. But sure enough, if they keep at it they can see results after three months and even a new physique after a year (working consistently).

This is because change happens continuously, but some changes are so small they cannot be seen or detected yet. They are certainly taking place, we just can’t see the results. It may seem like the progress has stalled, but micro-improvements are still being made. Plateaus are not indefinite, but rather temporary (seeming) stagnation before the next level. When you want to give up, remind yourself that change is happening, you probably just can’t see the results yet. Telling yourself this can help you keep going, even when things look like they have stalled.

Advice for Times of Stagnation: Growth is non-linear

When we think of growth or achieving a goal, we usually think linearly. remember Algebra class? Linear means a consistent rate of change. Many natural processes are more cyclical or seasonal. For example, a child can expect to have a number of “growth spurts” as they reach full development. No parent says “Darn he stopped growing for a week, guess they’ll be this small forever…”. We know (and accept…this is important), that growth doesn’t happen on a particular schedule, but rather cyclically, and often sporadically. When we feel discouraged we can remind ourselves that perhaps every season is not a season of growth. And that’s okay. This can help us keep going because we know that consistent action will reap rewards, even when we don’t see them yet.

The path to any meaningful achievement is seldom linear. There are times of stagnation, slowed growth, and perhaps even regression. If we can remember that this is all part of the process, it makes the pill a little easier to swallow. Thanks for reading!

The Importance of Delaying Gratification

Many of you have probably heard of or read about the Stanford marshmallow experiment. In the experiment, a child was given the choice between a small reward and two small rewards if they waited. Many conclusions (some controversial) have been made about the results of the study, but the basic takeaway is that the children who were able to wait for the second reward did better in life. This should come as no surprise. Life offers many choices and roads, and often the road that is a little more difficult is the reward that leads to better long-term results.

We will make Sacrifices Regardless

Everything in life requires a sacrifice. From the most mundane to the most consequential, life is a series of trade-offs. For example, if you choose the pleasure of smoking, you also choose the likely consequences of smoking. If you choose to take advantage of others, you will reap consequences (eventually) accordingly. If you choose climbing the corporate ladder over playing catch with your son, you sacrifice investing in one of the most meaningful relationships in your life.

So the question isn’t whether we will make sacrifices, the questions is what are we willing to sacrifice for? This is where delaying gratification comes in full force. When we make a decision we should think, what are the long and short term consequences of this decision? For example, if you buy a brand new car outside of your means, the short and perhaps medium-term consequences are pleasure and status. The long term consequence may be added years until retirement. If we can keep long term consequences in the forefront of our minds, we will make better decisions. If instead we buy a modest car and invest what we would have spent, that money would bring us dividends for decades to come. Sometimes you just want the nice car. I get that. Just remember what you are sacrificing in the process.

Success is a Long Game

When you throw out the outliers of the extremely lucky and gifted, the trust fund babies, and the con men and women, success is always a long game. I read an article by Brian Tracy years ago and its lessons have stuck with me and held me in good stead. I don’t think I can say it any better than him, so I will quote directly from his website.

In 1970, sociologist Dr. Edward Banfield of Harvard University wrote a book entitled The Unheavenly City. He described one of the most profound studies on success and priority setting ever conducted.

Banfield’s goal was to find out how and why some people became financially independent during the course of their working lifetimes. He started off convinced that the answer to this question would be found in factors such as family background, education, intelligence, influential contacts, or some other concrete factor. What he finally discovered was that the major reason for success in life was a particular attitude of mind.

Banfield called this attitude “long time perspective.” He said that men and women who were the most successful in life and the most likely to move up economically were those who took the future into consideration with every decision they made in the present. He found that the longer the period of time a person took into consideration while planning and acting, the more likely it was that he would achieve greatly during his career.

Brian Tracy

Imagine the rewards bestowed upon those with the longest time perspective. Think of those beautiful ornate medieval castles, or the beautiful streets of European towns. They didn’t look for the cheapest material and the fastest building time like we do now. The people who made them (whether well intentioned or not), knew that future generations would marvel at their grandiosity. I have a hard time imagining future generations fondly remembering McMansions. Our forefathers gave their lives in war to afford us the luxuries of our present. A dad with a modest job can set up his family for two or more generations of financial abundance with hard work and intelligent financial planning.

Delaying gratification is a major key in creating the things we want in life. Paradoxically, to enjoy long term comforts, we must overlook present luxuries. How far into the future do you look when you make decisions? Thanks for reading.

Why Success Isn’t Always Possible

I touch on a lot of this theory in my article Success is Cyclical, but I know anything insightful is worth repeating. Most people who are into personal development learn early on not to make excuses. We learn that our lives are our responsibility and we have to take action to get results. But as you mature, you realize results don’t always happen and aren’t always possible. You encounter numerous situations where the underserving get success and the intelligent, effective, and kind get ridicule. The reason this happens is because all living things are subject to cycles of growth and decay. “Good” things and “bad” things just the same. So the next time you feel like you want to be hard on yourself, gently ask “What season am I in?”, and you may get insight into your next moves.

Growth and Decay are two sides of the same Coin

Let’s take the stock market for example. Everyone loves when the market is up and hates when it’s down. Everyone, that is, except the wise. Wise people know that the stock market going down is both useful and necessary. When the stock market crashes, it forces companies and people to reorganize. After the first stock market crash we saw more legislation and federal protections from fiscal disaster. In 2008, we saw the Dodd-Frank Act. And, I believe, in the aftermath of the Coronavirus, we will see a push for Universal Basic Income.

A market crash can provide lower buying prices for a commodity that (we hope) will always go up. The point here is that when anything grows for too long, its outdated practices and inefficiencies necessitate a correction. This is why all successful companies, people, and organizations continually analyze and change as they gain more feedback over time. All those systems that don’t eventually fail.

Rewards and Recognition are Arbitrary

Speaking in generalities is a little dangerous. Of course rewards and recognition are good things usually given to the deserving, but not always. If you ever saw someone get promoted and you can’t wrap your head around why, this is why I say rewards are arbitrary. If you were a high-level executive at Enron, you would be rewarded and recognized for being dishonest. I think this happens in far more businesses than we would like to acknowledge. On the other hand, if you worked for an honest organization, you would be rewarded for hard work, ingenuity, and your ability to produce results. So if you took an honest, intelligent, hard-working person and put them in an executive position at Enron, chances are they would not be rewarded for their work (and hopefully the toxic culture doesn’t change their character).

Does that mean they aren’t doing the “right” thing? Of course not. It just means they are not doing the right thing to be rewarded under those circumstances. That’s why it is important that we screen all of the intimate relationships in our lives (work relationships, money management, romantic relationships, friends, etc.). We need to make sure our values are aligned with the values of the people we work closely with.

Hopefully this serves as some solace when you see things going sideways. Remember that success is not always possible, and that is a good thing!

The Frugality Pyramid

The 80/20 principle says that 80% of effects can come from 20% of causes. This principle, commonly referred to as the Pareto Principle, shows up in economics, science, finance, and a host of other areas. A good example is the fact that about 20% of drivers cause 80% of accidents. The big idea isn’t that the ratio is always 80% to 20%, but rather that results can be predictably unbalanced. For example, say you are trying to lose weight. You decide to eat healthy foods, but you still overeat. You will not lose weight because there is a bigger cause at play, your caloric intake.

Now, obviously this is a guiding principle and not a law. In my experience, and I am sure in the experience of countless others, when we look to save money and be frugal, the VAST majority of our results will come from reducing our spending in two major areas. Housing and transportation. These two expenses are 80% of frugality results. We would be wise to not major in minor things. Eating at home is nice and advisable, but address the elephants in the room first.

Don’t Buy More House than you Need

What is the single most expensive purchase you are likely to make in your life? A home. When we purchase a home, we are looking for safe neighborhoods and good schools, and perhaps even status. This is where many people go wrong. Instead of buying a home that fits our needs (safe neighborhoods and schools), we buy one that satisfies our wants (status etc.). For example, a pool would be nice, but a community pool is just as good (probably better). We may also want two guest bedrooms, but realistically, who has guests over more than a few times a year? Little desires like these can push us to buy a home at the upper limit of our means. I wrote an article about wise practices in home and car purchasing.

If that isn’t proof enough that we should be frugal in our purchase of a home, consider the major level of inflation in the size of homes over time.

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People and families haven’t gotten bigger (well…maybe we’ve gotten heavier haha), but the size of new homes is steadily climbing. What major elements do you remember lacking from your childhood home? Chances are our appetites have just gotten bigger. When choosing a home, if we are frugal, the savings are astronomical. Couple this with modest investment knowledge, and the path to financial independence is much closer than one might think. Not to mention that bigger houses have bigger utility bills and larger maintenance costs. And, this is just my opinion, but when the second housing bubble pops and future generations look toward efficiency rather than excess, many of these gargantuan homes will suffer losses.

Buy a Modest Car

The next big purchase is a car. If you are lucky and live in an area with good public transportation, you may be able to get by without even having a car. But chances are it is a necessary expense. One of the most ill-advised financial decisions we can make is to buy a new car. Mr. Money Mustache provides great wisdom on frugal approaches to buying a new car. Although extreme, the mental image of setting $20,000 on fire is effective. A new car is just one of the stupidest things to buy unless you are very wealthy and can afford it off of interest income.

The reason buying a new car is stupid is (at least) two-fold. One, the value of your car immediately decreases after you drive it off the lot. But two, you have just weakened your frugality muscle by giving in to consumer culture. This is likely to increase your desire for more luxuries along the way. This is a surefire way to derail you efforts at becoming financially independent.

Hopefully you gained some useful insights into why homes and cars are the two biggest areas in our lives in which we need to be frugal. Thanks for reading!

How to Keep your Life in Balance

One of the big lessons I have learned as I get older is that life is many shades of grey (maybe not 50 haha). There are very few hard and fast rules, but rather principles that should guide us a we flexibly navigate life. Not surprisingly, these principles hold true in most areas of life. It reminds me of the oft-quoted Bible verses about there being a time for everything. People who live one dimensionally and by very strict rules will inevitably have trouble in life. Someone who is always agreeable will miss opportunities to stand up for themselves. Likewise, people who are aggressive will miss out on benefits nature only rewards to the gentle. It’s not that being agreeable is “good” and being aggressive is “bad”, it is that there is a time to be each one, and more likely a good response is somewhere on a spectrum rather than an extreme.

These principles show up in most areas of our lives. A good teacher is a warm demander. A seeming paradox! They are emotionally warm, but have high expectations. Likewise a good parent loves their child unconditionally but also disciplines them. Any balanced approach to our lives requires that we navigate seeming opposites. Let’s take a look at a few areas this applies to in our lives.

Health and Fitness

A healthy person with a good relationship with food knows there is a time to be very disciplined in eating, and a time to enjoy eating. If we can keep our ratio balanced (say 80% healthy food, 20% fun food) our fitness and health will benefit. If we skew too much toward healthy food, we can become orthorexic, and if we skew too much toward fun food we become fat. So we see again, fun foods aren’t “bad”, they just need to be balanced by healthy eating. Many dieters also know that eating tasty high calorie food when dieting can help reset your metabolism and set the stage for more fat loss.

Similarly, any sensible exercise program has the majority (maybe 80%) of training as base training. For lifting, this would be multiple sets of 5-12 reps. For cardio, this would be talking pace, or long slow distance cardio. If we dabble too much in intense exercise (HIIT, very heavy lifting >85% 1RM, sprinting, etc.) we can quickly become overtrained. Interestingly, we can’t have one without the other. They are two sides of the same coin.

Money

A few years ago I stumbled upon Mr. Money Mustache. After reading about the FIRE movement, I became very interested in ways to become more frugal. When dealing with money, our default stance should be toward frugality. But we have to remember that the whole point of becoming financially independent is freedom. And sometimes that freedom comes with a literal price tag. We are frugal so we can enjoy our vacations with family and the occasional nice dinner. If we err on the side of spending frivolously, we go broke. If we skew too intensely toward frugality, we miss opportunities to have interesting experiences and enrich our lives. My wife and I cook most of our meals at home to save money, but we also enjoy (every couple weeks or so) delicious fancy dinners. Once again, if we keep this in balance (daily frugal habits with the occasional splurge) we get the best of both worlds.

Work and Play

Lastly, we see that work and play must also be balanced. Hopefully, we are on the path to financial independence. But in the meantime, we must balance our work as a necessity, with play as leisure. Most people don’t love their jobs. And that’s okay. We don’t go because we love it, we go because they send us a check every two weeks. If you do like your job, consider yourself lucky.

Because of advances in technology, most people are always on the clock. Emails flood our inbox at any and every hour of the day. Unless we make a conscious decision to set boundaries between work and play, we can easily get out of balance. My wife and I were recently taking a walk on a beautiful Saturday afternoon. When I looked at my phone, I had over 10 emails and messages (none of them urgent) that I had received during that one hour walk. Apparently no one else was outside enjoying the weather! I try to make a habit of “unplugging” as often as possible. Think about it, there were emergencies before cell phones, so if something is urgent, people will find you.

Hopefully you have gotten some useful insights into ways to keep your life in balance. Thanks for reading!

Universal Basic Income

I wrote in a previous post that Coronavirus will teach us many lessons and new ways of interacting and being in the world. I think a huge change that will come as a result (even after the virus dies down) will be Universal Basic Income. Perhaps not this (2020) election cycle, but I imagine a good chance in the next cycle.

I gave a project in one of my math classes that asked students to search for a home and calculate mortgage payments etc. I always try to give students some real world use for the math they are learning. Even though they all sigh when I say “math is beautiful”. Anyways, I linked for them to use Redfin to search up their homes. I (naively) assumed that Redfin was everywhere. It is decidedly not. My wife and I bought our house using Redfin and it was very easy, and from what we could tell, very “user-friendly”. But many parts of the country that are less economically well off haven’t even benefitted from this new technology. Long story short, I began looking for the reasons behind this technology gap. It couldn’t just be race, it was very clearly socio-economic.

I say that to say, I then stumbled upon “The War on Normal People” by Andrew Yang. A fantastic book! In the book he talks about how our changing economy (especially after the Great Recession) has pooled resources among smaller and smaller groups of people. Many Americans are simply being left behind. Yang says that automation will eventually put large groups of people out of work. His solution is Universal Basic Income. I immediately followed his every move starting in mid-2019 until he eventually dropped out of the Democratic Presidential race in February 2020. He did very well for a “nobody” competing among much better resourced and connected candidates.

In comes Coronavirus. Even conservative estimates predict up to 30% unemployment as a result. People who are hard-working simply can’t work. It’s not their fault. They aren’t lazy, they didn’t do anything wrong, they were just blind-sided. It necessitates a change in thinking. If people who are willing and able to work can’t, should we deny them human decency? Would we rather spend our money on at least a certain percentage of lazy people on welfare? Or would we choose to give money to people as an investment, knowing that most hard-working people will immediately invest that money back in their communities? Most people won’t buy drugs or alcohol with it. They’ll get tutoring for their kids, get their car fixed, go back to school, or stay at home and raise children. So we see the first glimpse of a universal income from the Trump presidency?!?! Interestingly enough, living in the cultural “progressive” bubble that is the DC area, I find that many “democrats” are surprisingly close-minded about UBI whereas many more conservatives can see the value. Talk about irony.

My prediction is that Universal Basic Income will become a reality for all Americans within the next 10-15 years, likely sooner rather than later. What do you think? Thanks for reading.

New Chandelier (and why I do little projects like this)

As I learn more and more about money, one of the essentials always comes back to the forefront. The idea of an asset as opposed to a liability. I just put up a new chandelier in my living room. Projects like these are always a mixture of excitement, disappointment, and eventually great satisfaction. As with any new project, the first time is hard. But not in an oppressive way, just in a matter-of-fact kind of way. Something you learn to absorb as part of the process.

My old chandelier (which I truly hated)…
The new chandelier…which I love!

As with most projects, this seemingly simple task had a lot of little frustrations built in. Nothing major though. And now, next time I want to change a chandelier, I will know exactly what to do and what not to do.

Whenever I spend money I ask myself if the purchase is going to provide any returns or if it will end up taking money from me in the long run. Something like putting up a new chandelier can be a little change that could increase the resale value of my home. So I go for it!

I look forward to doing a lot more little projects like this because, as I said before, the process is very satisfying.

The next time you make a purchase, ask yourself, “is this a liability or an asset?”, and in no time making intelligent purchases will come as second nature. Until next time…

Inspect What you Expect

In fitness, relationships, finance and life, this old management theory seems to ring eternally true. Inspecting what you expect means to constantly monitor anything that you care about or prioritize. There is an idea, which I first learned from reading the works of Bill Harris of Centerpointe Research Institute, that all things tend to break down and become disordered unless energy is added in some way. This is called the Law of Increasing Entropy. When I think about my wallet, my waistline, and the health of my relationships, I know this Law to be true. A little too much rest, a little indifference and things start to get out of hand. Of course, life will always have challenges that are not of our making, but much of our unhappiness with our results can come from failure to recognize and respond to this Law.

Inspect your Plate and your Weight

I recently got back in the habit of weighing myself daily. What a shock! Despite feeling pretty good, I am about 20 pounds over where I want to be. By being intentional about what I am eating and monitoring my workout plan, I was able to lose about a pound in one week with very little effort…just a little more awareness (I am a 5’11” muscular guy so ymmv). It truly is amazing how when we take our eyes off of what is important, things can change for the worse very quickly.

Early on in my fitness journey I also got in the habit of tracking my food. Using a tool such as MyFitnessPal makes this almost painless. Without fail, every time I “take a break” from tracking, I lose/gain unwanted weight, or my workouts and energy levels suffer. Just like clockwork, when I am more regular in tracking my calories, I can pinpoint exactly where the extra pounds (or lack of energy) are coming from.

Keep an Eye on Expenses

Parkinson’s Law says that expenses will rise to meet income. Very true! Think about it, when most of us are 25, we have all the major things in life (a place to live and a car), but most people, as they earn more money, continue to get bigger and better versions of those things. Think about it, if you make $50,000 you can afford to have a car. You will likely (if you are sane and logical) spend maybe $5-10k on a car. But years later as you grow in your career making maybe $100,000 you may be tempted to proportionally increase the price of your car. Bad idea! If you can muster the discipline to live well below your means, you will be able to grow your wealth at an astounding rate.

When we take or eyes off of our expenses we fall prey to one “super-size-me” to the next. Bigger house, bigger car, bigger yard, vacation homes, luxury spa memberships. If we can keep an eye on our spending, we can take advantage of Parkinson’s Law and get closer and closer to financial independence.

Obviously this idea of monitoring to make progress applies to countless other areas of life. Hopefully you gained some insight to make a positive change in your life! Until next time…

Listening to the Seasons

I started seriously working out in the spring of 2012. I remember the exact event that motivated me. I went to the gym with a colleague and we went to the bench press. I did my customary 5-8 reps of 135 lbs and when it was his turn, I watched with amazement as he easily repped 225 lbs. I was amazed. I made a decision that one day I would be able to do the same.

I started my fitness journey doing Stronglifts 5×5 (an excellent start). Within just a couple months, all my lifts had gone up significantly. Then something happened. Progress slowed. Alot. I tried to push past it, but workout after workout I grew more tired and burnt out.

Any fitness professional worth their salt would know the obvious answer is periodization. Basically meaning altering the volume and intensity of your workouts over time to allow for full recovery.

I say all that to discuss an important idea when it comes to fitness and to life. The seasons.

There is a Time for Everything

Ancient wisdom going back to King Solomon talks about the importance of seasons (“There is a time for everything…”). It took me a while to see the true wisdom in understanding and going with the seasons.

When I began to periodize my training, I started to make progress again. Albeit more slowly, but progress nonetheless.

I then began to notice the same patterns in other areas of my life. At times, things would thrive, and then at other times, despite my most valiant efforts, things would change or “get worse”.

In my mid-twenties, I happened upon a book by Jim Rohn entitled “The Seasons of Life”. Reading this book gave me a philosophy that I refer to often (especially in difficult times). I want to share a few of these experiences so that hopefully you can notice and go with the seasons of your life.

Seasons of Fitness

Our bodies cannot work at 100% all of the time. There is basic information we have to know about how our bodies work in order for us to get the most out of them. For beginners, you should follow a linear program. Meaning you should add more weight to the bar, or walk/run longer, until you stop making progress. When you become an intermediate athlete (which will take 3-6 months), then you begin to periodize.

Now with this bit of wisdom, I know that I can’t always lift heavy. I need light days and deload days. I also need to work on other aspects of my fitness to improve. I highly recommend working with a good fitness professional if you are having any trouble at all reaching your goals.

Financial Seasons

Money is an interesting thing. Sometimes you feel like you have more than enough, and then other times, scarcity overtakes you. I am reminded of a story in the bible where David is asked to interpret the Pharaoh’s dream where he sees seven skinny cows and then seven lean cows, and the lean cows eat up the fat cows. David interpreted this dream to mean that there would be seven years of plenty, and then seven years of famine. David’s solution was to save 1/5 or 20% of all the grain during the good years. As a result, Egypt had food all throughout the lean years.

I believe this will be true of pretty much everyone’s financial situation. Sometimes money will come in from unexpected sources, and other times unexpected bills will pile up. So what do we do? We learn to live frugally and save for those times when opportunity and money is hard to come by. Coincidentally, a 20% savings rate would be a great place to start (hopefully ramping up to 50% or more over time).

Just a few weeks ago I got an unwelcome bill. To the tune of $4,000! Of course I was bothered, but my wife and I have carefully planned and saved to the point where a bill of this size is actually no big deal. The comfort of knowing you can handle a financial setback is much better than the comfort of riding in a new car…to me at least…

Professional Seasons

Seasons become very apparent in our work. Sometimes things come to us and thrive. The promotion comes, we learn a new skill or a new way to earn money, and everything is great! And then there are other times where we are looked over for a promotion, a colleague says a harsh word to us, or our work begins to overwhelm us and throw us out of balance.

Here too, we are admonished to submit to the seasons. We should always be learning and growing, but we should be patient (and expect) that we will meet the inevitable plateau and/or backslide. During these times we have to remember that our next season of opportunity is coming. What are we doing to prepare for it? Are we reading? Are we speaking with wise older people? Are we trying new things?

In conclusion, just as the seasons of weather dictate when we will sow and when we will reap a crop, the seasons of our lives dictate when we will sow and reap in our relationships, finance, health/fitness, and work. Let’s be sensitive and listen to the wisdom of the seasons.

Until next time…

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