Best Week In A Long Time

I’ve conducted a number of annual financial reviews with clients this week and it has been one of the best weeks in a long time.  No one will try and convince anyone that the uncertainty and the fear that’s been prevalent over the last two years is gone, but the comments and attitudes expressed by my clients this week have left me feeling extremely optimistic and positive.

Maybe one of the positive outcomes of recent struggles and difficulties will be a collective alteration to our priorities.  I’ve mentioned in an earlier blog post (http://wallfinancial.blogspot.com/2010/09/today-vs-yesterday.html ) how many clients have been reexamining where they spend their money, how they spend their time, what they feel is an important financial example for their children, etc. 

Label it how you want, but I have recently thought that it is best described as a return to genuineness.  A more reasonable level of consumerism, a more reasonable set of investment-return expectations, a more reasonable use of credit, and a more focused and intentional allocation of income (i.e. more closely following a budget) are probably good long-term goals for each of us and collectively as a national economy.  Perhaps these forced new habits will become habits by choice as we begin to see more tangible evidence of their benefits.

So when conducting annual reviews this week and I hear things like “we are very happy”, and “we really didn’t realize how much control we really had”, and “we never knew how great it would feel to be completely credit-card-debt free”, and “we are a lot more prepared for the future”, it gives me confidence that lessons learned the hard way will leave us better off and happier. 

What This Blog ISN'T

The  most common questions I get via this blog usually look like:  “Why don’t you give more investment tips?” and “How does any of this relate to me?”. 

“Why don’t you give more investment tips?”

1.       I don’t know you, so I can’t say that you should be investing.

2.       Tip: be wary of “tips” from people who don’t know you or your situation.

3.       There are literally millions of other web sites giving investment tips and the world doesn’t need another one.

“How does any of this relate to me?”

1.       Maybe it doesn’t.

2.       I believe most people want to be happier financially and these are just my thoughts on starting that journey.  Maybe one of them motivates you, too.

3.       Unless money is your idol, I believe gentle reminders that finances follow a happy life and not the other way around might be a positive influence.

Give Hilariously

Someone I admire coined that phrase to describe his commitment to giving his time and money away.  How many people laughed/scoffed at pronouncements by Bill Gates and Warren Buffett that they intend to give their fortunes away?  How many people who didn’t laugh instead said “that’s easy for them to do because they are billionaires?”

My friend is definitely NOT a billionaire and yet he and his wife have given a lot of their hard-earned (and sometimes very scarce) money away every year of their 35 years of marriage.  How many people would laugh at that? 

Some people give because they feel there’s an opportunity for their God to work through them in positive ways.  Others give because they feel a moral obligation to share.  Others give because they feel that philanthropy outperforms government/political options.  Others give because they are angry at inequality and injustice. 

In my last post I shared how I often find people living in ways that are not in alignment with what they would describe as their priority in life.  The good part is that at least the priorities are there in the first place!  What is equally encouraging is that almost everyone I work with has a desire to give something away to people they believe are not as fortunate or not as blessed.   I think this is no small phenomenon and one worth more than just an “ah, that’s nice”. 

So maybe it is a little funny to be challenging ourselves to give money away after/during one of the most uncertain economic times in 80 years.  And maybe it’s funny to think that even small amounts can make a difference in someone’s ability to work ( www.kiva.org ).  And maybe it’s funny to think that $1/day can pay for medicine and clean water and food and education ( www.worldvision.org ).  And maybe forgiving the poorest nations’ debts to the world’s wealthiest is funny, too ( www.one.org ).

We Say A, We Do B

I feel the most important part of my job is helping people get at the heart of their life’s motivations.  Why do we work?  Why are we planning for the future?  Why do we save for our children’s college education?  I think that understanding motivation is the most basic and beginner-level requirement of being a good advisor.

Most every person I meet quickly tells me that their primary motivation for all of their work and saving is for the love of their family.  Most every person I meet says that they want to provide for their family, to give them opportunities, and to deliver safety and security.  But then I get to take a closer look at exactly how people are actually living and then the real work begins.

Most people I meet with aren’t living like they are pursuing their own motivation.  This is what I see more often than not:

Expressed Motivation	Behavioral Reality
I work for my family’s security	I’m miserable at my job I’m a total grump at home
I save for my kids’ college opportunities	I’m not home for dinner much and don’t see my kids
I want to teach my kids good lessons & habits	I keep adding to unnecessary credit card debts
I want a closeness with my spouse	We never do anything together
I want retirement-years free time with my spouse	Our money + other stresses are hurting our marriage now

I am certainly no touchy-feely counselor or preacher for exactly how people should live and I have no expertise or recipe for making everything work perfectly.  But I have been blessed with many clients who trust me to help them with their financial planning.  This means I get to help them identify what they want and then work alongside them over the years to help them achieve it.  This blessing and experience has showed me how often we all occasionally lose sight of what we desperately want to believe are the most important things to us.  I wish it were less common, but it is what I see.

So ask yourself first “What are the most important things in my life?” and then take a look at two things: 1) your checkbook, and 2) your calendar.  Is how you are living working toward making you happier?  If not, the good news is that there is nobody stopping you from making a change!

Nevertirement/Retirement Checklist

Not always received favorably, you’ll recall my prior post advocating a Nevertire plan vs. a Retire plan (http://wallfinancial.blogspot.com/2010/09/nevertiree-vs-retiree.html).  No matter your opinion on that, planning for the future regardless of whether you want no-work, or passion-work run very similar parallels for the majority of the time people maintain careers.  When you are 30, for example, your habits of saving for future goals really don’t hinge on whether or not you want to stop working altogether at age 65 or start leading bike tours at REI.

So whether your dream is to retire completely, partially, or not at all, here is a Nevertire/Retire Checklist that might be helpful.

When you are in your 30s:

• Build an emergency fund.  Do you have at least 6 months worth of cash?
• If your employer offers a 401(k)-type savings plan, use it!
• As your salary increases, so should your 401(k) contribution.
• Look for other tax-advantaged ways to save.
• Understand risk, but think growth-focus.

When you are in your 40s:

• Be disciplined with how you pay for things (debt vs. cash) and boost the emergency fund.
• Get real.  This is when many get their first shock saying, “I really need THAT much to retire?”  Better to know now than later.
• Keep it simple.  If you have 2 old 401(k) accounts, 3 IRAs, 2 brokerage accounts, consolidate what you can to make it easier to follow.
• Are you allocated correctly for your risk tolerance, age, goals, etc?  Many folks need some serious rebalancing.

When you are in your 50s:

• Get real (again).  Keep a close eye on progress toward goals.  What needs to change?  The sooner you act, the better.
• Get an idea for how you will derive income in retirement.  Do you specifically how it is going to work?  Understand the details.
• Are you allocated correctly?  Might be a time to reposition your investments and rebalance again.

When you are in your 60s:

• Most folks have a specific plan, so general advice probably isn’t wise.  All actions need to support your plan.

Why Are You Talking To Me?

A woman asked me last week for my reasons why she should hire me and I told her that I didn’t think that she should.  What was missing was her reason for why she was meeting with me in the first place.  I didn’t think it was justifiable to lead her toward an engagement without her being the driver as to why she needed it.  

I go to my physical therapist instead of using webmd.com because I want my shoulder fixed when it is injured.  I use my CPA instead of filing my own taxes because I want my returns to be accurate.  We cannot be experts at everything and for the most important things in my life I am happy to place much of the work in the hands of an expert whom I trust.  But, I am not vague in why I am using them as my expert. 

The woman I met with last week told me only that she wanted to be sure she was “headed in the right direction”.  When I asked her where she wanted to go she wasn’t able to answer.   It isn’t necessary to have the answers as that’s the reason why experts exist in the first place, but it is necessary to have the questions.

So be intentional with why you’ll be hiring a financial planner.  I advocate intentional living many times in this blog and it should be no different when deciding whether or not to use a financial advisor.   

 

I think these are good reasons to consider hiring a financial advisor:

• We want help creating a plan to reduce our debt and increase our savings in order for us to be able to afford to pay for our kids’ college. 
• We would like to retire from our current jobs at 65 and start an online distributorship for local farmers and we need a plan for how to get there.
• We want help figuring out how to be less concerned about the fluctuations in our investment savings accounts as we age and become less tolerant of risk.
• We want to downsize our financial commitments and move downtown to a condo, so we need a plan for how to do that.

 I think these are not good reasons to consider hiring a financial advisor:

• We want someone to tell us if we’re doing the right things.
• We want our investments to do better.
• We want someone to watch our backs financially.
• We need to save for retirement.

Be more protective, possessive, and demanding of what is important to you.  Give specific reasons why you are hiring someone and I’m guessing you’ll get better advice and a much more valuable relationship.

Bandwagon Jumpers

Firms in the investment advising industry are changing their tunes a bit lately.  When times were “good” they spent millions on advertising trying to convince you that you’d be wealthy beyond your imagination.  “Just wait until you retire and wow! what a great life you’ll have sailing on your yacht all day. “

Now that consumers have been through a bit of a rough patch have you noticed that more and more commercials from investment firms have toned themselves down?  Now they are telling you that they’ll make it easy to convert the 401(k) from your lost job into an IRA, or that they’ll help you plan a much more reasonable retirement so that at least you’ll be comfortable. 

So the message from them seems to be that during times when they want to sell unreasonable expectations that your $4,000 investment in your IRA this year will become $1,000,000 in just 15 years, they’ll be there to help you believe that.  And during times when you have unreasonable fears that you can’t accomplish anything financially, they’ll be there to help you at least with the paperwork when you lose your job. 

Barf.  Instead, why don’t you choose to work with someone who is going to send you a consistent message?  Personally, I like the one where we say that we’re going to know you well enough to understand what you want and to be courageous enough to tell you the truth about you getting there.  That used to be rather unpopular when we told people to tone down their expectations as their portfolios kept jumping up.  But we kept saying it and believing it and working at it. And now it is rather unpopular to tell people that the personal pursuit of financial happiness is possible.  But we’re going to keep saying it and believing it and working at it.