Fearing Regret Is My Motivator

Is the picture in your mind of how you’d like to be living different from how you’re actually going through life?  If so, stop what you’re doing and change things.  A lot is at stake.

Nobody wants to say years from now that their life didn’t turn out as they’d wanted or expected.  I absolutely cringe when I hear people say things like, “retirement isn’t what I’d thought it would be”, or “I did all of that for this?”.  Regret is the worst feeling in the world because there’s nothing you can do about it.

But what you can do is take specific actions to avoid and thwart having future regrets.  Action taken today is the preventative medication against a future outbreak of regret.  Skeptical?  Try this:

1.       Pick something that you want to see yourself doing (travelling, writing a song, skydiving)

2.       Do it

3.       Pick something else (learning a foreign language, building a table, sitting on a beach)

4.       Do it

5.       Repeat steps 1-4

I’m not being cheeky, it’s serious and it’s actually very hard.  We have a tendency in this country to believe that our life is supposed to follow a path of thinking that today is supposed to suck so that tomorrow will be better, especially when it comes to our careers and financial planning.  I don’t buy it.

I have the benefit of being able to observe many people in different stages of career success, financial health, and happiness.  Those who seem to be at the highest levels in all of those areas are those that deny the “traditional” path of slogging through work and then praying for a good retirement and instead seek a balance between responsibility and life experience.  I see it so I believe it, and I wonder why it’s not a more popular way to live.

GIGO - Garbage In, Garbage Out

Garbage In, Garbage Out.  I feel that way about 95% of the financial plans I see people bring to me for review.  I don’t mean that 95% of the plans are garbage, I mean that 95% of what is contained in the financial plan is garbage.  I say this because when I ask clients about the plan someone wrote for them and as we review it together it is clear that either

a)      They don’t understand the substance of what is written

b)      They don’t know why all those charts and graphs are there

c)       Most critically, they never use any of it to help make financial decisions

Sometimes I think that financial plans are written and printed to try and make the advisor look good.  If the plan is 100 pages long and looks very complicated and is full of numbers and charts then that helps reinforce the message that the advisor is smarter than you and that you should listen to whatever they tell you. 

Barf.  Look again at your financial plan.  Go through it and mark every page that helps you make a financial decision.  If you found more than 5% of the pages helpful to you, then you’re better than most.  If not, demand that your plan be written simply and succinctly enough so that you can actually use it.  If you feel you need your advisor to show you all of their homework and research before you trust their recommendations, maybe you need a new advisor.

KIVA Loan Update: Sharing Blessings Thru Finance

We have made three microloans through www.kiva.org and here’s evidence of how credit-worthy even the poorest of the poor are.  Read the prior blog posts http://wallfinancial.blogspot.com/2010/11/in-september-i-posted-on-powerful.html and http://wallfinancial.blogspot.com/2010/09/sharing-our-blessings-thru-finance.html .

·         Magdalena Agsunod's Group in Philippines (Activity: General Store) Total Repaid So Far: 58.40% of your loan

·         Rose Wanjiru Njuguna in Kenya (Activity: General Store) Total Repaid So Far: 8.32% of your loan

·         Sol Y Estrellas Group in Mexico (Activity: Grocery Store) Total Repaid So Far: 21.32% of your loan

Sometimes a hand up is more helpful than a hand out. You too can give someone a job where opportunities are virtually non-existent for as little as $25 at www.kiva.org.

Plan To Be A Nevertiree

According to a Wells Fargo study:

The average savings of 50-somethings is only $29,000, which comes out to an income of $190 a month over 20 years assuming a 5% rate of return.  According to the survey, only 33% of Americans have a detailed written retirement plan and 37% don't know how much they will need in retirement or how long they will be able to live on what they have saved.  The survey found that 72% of Americans now expect to work through retirement, with 39% saying they will work because they have to and 33% saying they will do it because they want to.

Do you think that the same survey taken 20 years ago would show 72% of Americans expecting to work through retirement?  I don’t.  So whether it’s empirical or intuitive, people are smart enough to realize that the retirement game has changed.  So if that’s true, do you want to be one of the 39% who think they’ll be forced to work, or one of the 33% who think they’ll want to work?  I know which group I want to be in and we can help you design a plan that incorporates an I’m-looking-forward-to-it retirement component.

Be more than just prepared, be in control.  Establish a plan that looks forward to retirement with realistic expectations and then you can live happy today knowing that you believe in the direction that you’re going.

Non-Profit of the Month: World Vision thru Sammamish Pres Church

Tackling the causes and effects of poverty and injustice is kind of a big job.  It ain’t going away overnight.  But sometimes small steps, when taken together with other people, can make a mind-blowing difference in the lives of people who otherwise might not have hope.

Mahlalini is a village in one of Africa’s smallest countries, Swaziland, where 60% of the population live on the equivalent of $1.25 per day, over 40% of the population is infected with HIV/AIDS, 1 out of every 5 children is an orphan, a 15-year old has only a 20% chance of reaching age 35, and 15,000 households are headed by orphaned children.

Enter World Vision

Swaziland is not unique in its need, as about 2/3 of the entire planet’s population eek out meager and difficult livings.  World Vision (www.worldvision.org) supports children from all over the world by matching donors and needy kids for monthly support of $35. 

Enter Sammamish Presbyterian Church (SPC)

Anyone can go to www.worldvision.org and begin a relationship with a child in need, which I encourage you to at least think about.  But SPC (www.spconline.org) decided to make an even more dramatic impact by collectively focusing on a specific community, Mahlalini.  In a partnership with World Vision over 140 families in Sammamish, WA have adopted children from the same community, have maintained written communication, have traveled to their village, and have continued to spread the word about how small change from us can make a huge change in the life of a child and their supportive neighbors.  It is a coordinated all-out blitz attack on poverty.

Our non-profit of the month for December is actually a monthly sponsorship of a child in Mahalini. We are excited to share with you whom we get to sponsor in Swaziland and will keep you updated just like we have with our microloans thru www.kiva.org .    Check out the video of the trip to Mahalini http://www.spconline.org/pages/Mission/ChildIsWaiting.html

Be Like Jerry Rice

The best way to achieve a strong level of personal net worth is to build it over a long period of time by paying attention to yearly successes.  If in a year you earn $100 (after tax), spend $75 of it, see your investments grow by $5, and don’t borrow any money, then you “make” $30 and your personal net worth will  jump up by that same amount.  Add-up 45 years of doing that and you’ll have accumulated something significant!

And the only way to do that is to recognize that long-term success comes from the aggregated results of paying attention to small-detail habits.  The most successful athletes are habit-focused, as are the best teachers, as are the best parents, as are the most financially secure families.   Jerry Rice was the best wide receiver in football not because he focused on being a good receiver, but because he focused on habits like how to plant his feet, how to move his hands, how to shift his hips.  His famous workout regimen focused exclusively on small skill drills that he repeated over and over and over until he became the best at his position.  There are lessons and good news in that!

If you are having a hard time figuring out how you are going to save enough for ________________(retirement, college, vacation, debt reduction), focus daily on the habits that will support that longer-term goal.  If you want to buy a house in 5 years, practice using only cash to make purchases instead of your credit card, practice removing money from your paycheck and putting it in savings, practice cutting back on things you buy but don’t really value.  Become the Jerry Rice of your finances by focusing and religiously practicing the financial habits that will then lead you to become financially successful.

The good news in this is that it is much easier to decide on a daily basis what to do with your money than it is to try and tackle a five-year plan all at once.  Figuring out how to come up with a down payment on a house is hard.  Figuring out that you should not buy the latte with your VISA card is not.  Most of us can start small and it is how most of the wonderful things in life are built – small details now, big results later.

I Am Thankful For These Things (And More)

The 26 years I’ve known and loved my wife | My two amazing daughters | My parents, sister, and my sister’s family | My in-laws and my nieces and nephews | My friends, many of whom are as close as family | My church | Being born in the U.S. | Having the freedom to own my own business and work as I believe | Being healthy | Having so much of everything that I take for granted how simple my survival is | Having the experiences of international travel | Access to education | Clean water | Men and women who volunteer for service and sacrifice in our armed forces | Music | The invention of football | Comedy| The luck and wisdom of our Founding Fathers | Sunshine | Washington, Montana, and all places naturally beautiful | The fact that most people would trade for my “problems” in a heartbeat | You reading my blog.

Happy Thanksgiving!

Does Too Much "Tomorrow" Hinder Happiness Today?

I heard a radio commercial this morning for a large mutual fund company who staff in-house representatives to help clients develop financial plans.  I won’t quote the tagline but it sounded very similar to virtually every other financial planning firm extolling their prowess at helping clients achieve future financial goals.  Basically, the ad focused on how great your future could be if you use their goal-focused planning. 

I do something similar for a living and I won’t knock the value of long-range planning or criticize peers for advertising long-range planning services.  But I’m going to pick on one element of my industry that I don’t like.  One of the easiest ways to do this job is to present a proposal for a 25-year investment plan, charge an annual asset-management fee, send quarterly newsletters, monitor progress on an annual basis, send more newsletters, and have absolutely no accountability for the quality of the plan until 25 years has gone by!  I have rubbed elbows with financial advisors who have made careers writing and managing long-term plans with no focus whatsoever on helping someone with their current financial situation, their current level of happiness, or their current pursuit of positive life experiences. 

A predictor of your future financial happiness is not how well your current investments are tracking against the plan someone wrote 10 years ago (where they probably assumed an annual investment return of 10% - look up one of your old financial plans to see what I mean!).  Instead, a better predictor of your future financial happiness is your happiness today and the financial habits you are creating today that specifically target how you want to live. 

There are too many people who get done with their 25-year investment plan only to say how surprised they are that things didn’t work out as they thought they would.  There are too many people who sacrificed their money, time, and emotional happiness for decades all for the belief that retirement was going to be awesome, only to die or get sick not long after quitting work.  There are too many people who find no added joy in retirement because they never made it a habit of pursuing joy before they retired.

The solution is not to stop long-range planning.  The solution is to be sure that you somehow tie your long-term goals to immediate behaviors and accomplishments which support a happier, more intentional way of living.  Like most things in life, if you are always planning and not currently pursuing and experiencing, you’re not likely to ever realize any of the things you want in the future.

Sharing (More) Blessings Thru Finance & Economy

In September I posted on the powerful impact we can have by making small loans (for as little as $25 through www.kiva.org ) to entrepreneurs around the planet (http://wallfinancial.blogspot.com/2010/09/sharing-our-blessings-thru-finance.html ).  Did you know that 2.1 billion people live on less than $2 per day?  If that was you, how would you help yourself fight your way out of poverty?  How would you start your own small business?  How would you buy seed to start a farm? 

Those of us with access to a working financial infrastructure can help those who don’t via microlending.  So on the same day as that blog post we helped lend money to a woman in the Philippines who ran a general store which generated about $115 worth of month income for her family.  Since that date, the woman in the Philippines to whom we loaned money has already repaid 41% of the money lent to her!  This is ahead of the debt repayment schedule she committed to through Kiva, by the way, and a lot faster than most of us could repay our business loans!

With the money repaid from Magdalena I reinvested it in two more loans to two different entrepreneurs: 

Rose Wanjiru Njuguna who lives in  Kenol-Muranga, Kenya

Rose is 50 years old and married to James Njuguna.  She and James have three children. She has been running her shop for 16 years with an income of Kshs 11,500 per month (that works out to about $4.80 of income per day). She has a good history with KADET and is applying for her third loan which she intends to use to buy stock of flour, bar soaps, and liquid detergent to sell. She hopes to buy a piece of land for the family.

This group is called “Sol y Estrellas” (Sun and Stars).  The group is located in Toluca, Estado de México, Mexico

Yolanda González is a member of this group. She is 40 years old and has a sixth grade education. Yolanda works as a merchant and has four children, two daughters and two sons. She has a grocery store that she started seven years ago. Yolanda is requesting a loan to restock her store with more merchandise. Her customers include neighbors and acquaintances from the same community since it is the only store in the area. She wants to use the funds to increase her sales. In addition, she hopes to help her children do well in school and continue their studies.

About Group Loans

In a group loan, each member of the group receives an individual loan but is part of a group of individuals bound by a group guarantee. Under this arrangement, each member of the group supports one another and is responsible for paying back the loans of their fellow group members if someone is delinquent or defaults.

"Nevertirees" Are A Growing & Powerful Demographic

In past blog postings I’ve commented on the appeal and the practical reality of never completely retiring in the traditional sense.  It is a growing trend and resources to help are flourishing. 

Marc Freedman, founder of a nonprofit called Civic Ventures, coined the phrase "encore careers" to describe these second (or even third) callings. Almost half (45%) of working adults ages 44 to 70 say they want to pursue an encore career in retirement, according to a study Civic Ventures conducted with the MetLife Foundation. Another 6% in the same age group, or 5.3 million people, are already doing so. Of those, most (70%) work in education, health care, and government agencies, and 60% put in 40 hours or more per week.

Whether you desire starting an encore career trying to fill a non-profit need that you care about, or of starting a business, or of taking on a part-time job at a company that excites you with what they do, check out this great website http://www.encore.org/ .  Their tagline is “Combine passion and purpose with a paycheck”.  Actually, a great credo for all of us!

Non-profit Of The Month: Sole Hope

This month’s non-profit is Sole Hope. We will be donating our monthly $250 to this organization.  My sister tipped me off to this organization which not only helps save lives of shoeless children of Africa, but teaches women a trade and business skills necessary to start a sustainable career and income.  More about  Sole Hope:

Asher Collie visited Ndola, Zambia, in the Spring of 2010 as a member of a mission team. She saw firsthand the poor condition of orphans’ and widows' feet because most were shoeless. Because they had no shoes they suffered intense foot wounds which were often infected by tapeworms and other diseases, robbing their bodies of the little nutrition that they had.  Asher felt a call to solve the effects of going shoeless.

Asher developed Sole Hope which does more than just put shoes on feet.  Sole Hope teaches women in Africa the basic technical skill of shoemaking and then helps them to build a sustainable business plan which can support their families with income.  The shoes made by these women are sold for donations ($25 for a pair of children’s shoes) and placed on the feet of kids in Africa.  The money paid for the shoes goes to purchase natural African resources used as raw materials and to paychecks for the women who made them. 

Learn more at www.solehope.com .

YOU Are Your Economy

In previous blog posts I’ve expressed hope that our economy’s recent difficulties might support a refocus of financial priorities, most of which I think would be good for our long term success, happiness, and capacity.

In previous blog posts I’ve mentioned how many of my clients are talking about how they want more realistic goals, how they want less complicated lives, how they want more financial security, and how they want “old fashioned” financial discipline and habits.  I cannot be the only one seeing this because check this out:

NEW YORK (CNNMoney.com) -- Americans have paid off nearly $1 trillion in debt over the past two years, according to a regional Federal Reserve report released Monday. Total consumer debt was $11.6 trillion as of Sept. 30; down 7.4%, or $922 billion, from the peak reached in the third quarter of 2008, according to the Federal Reserve Bank of New York. "If consumers can continue to repair their balance sheets, that bodes well for the sanity of the economy in the long term," said economist John Canally of LPL Financial.

If as a nation we want our companies and our governments to change their financial behaviors and fix their balance sheets, I am convinced that the best way to do that is to do it at home first.  If more responsible spending and use of credit begins in each household, it will not only become a part of our national consciousness but it will become the only acceptable model of a long term strategy.  You are what’s called a “leading indicator” because your behaviors predict what the economy and your government will be doing.

When we ran up our personal debts so did the companies we invest in and so did our government, as they are collective reflections of all of us.  So let’s see what happens when we reduce our total personal debts!  Anyway, $1trillion!  This is very big and very good news!

Spend Money and Time With Friends

Last Friday evening.  Dumping rain. Terrible traffic.  Everyone had a cold.  A group of friends met for dinner in Seattle after a long week.  Tired and irritated and arriving with heavy sighs, maybe some would have preferred soup, TV and an early bedtime. 

Jump ahead four hours and everyone was still there having lots of laughs, sharing funny stories and grumbling about having to leave and go home.

Such is the obvious reward and importance of friendships and interactions with people we care about and enjoy.  It can’t all be about work and it can’t all be about accumulation of things and it can’t all be about “getting things done”.  The regenerative effects of spending a Friday night with a group of friends was way more important and lasting.  In fact, I’d argue that spending money on nights and occasions like that is important and should be a part of your plan for life and your finances.

How To Move Closer To Financial Happiness

If you aren’t quite to the point where you’d describe your financial situation as “happy”, or if you feel that your finances are creating a gap between how you live and how you want to live, where should you focus your first efforts at improving?  After 20 years of working with people on financial matters, here are my observations ranked in order of what you should do first.

Important Areas of Focus	Specific Action Step To Take
Breathing Easier	Stop spending more than you make.  Now!
Sleeping Sounder	Build up cash reserves.  Start small, if necessary.
Heart Beating More Regularly	Attack credit card debt with payoff plan.
Feeling More Optimistic	Sleep, eat well, exercise.
Smiling More	Make time with family the first priority.
Daydreaming More	Develop bucket list.
Having Better Dreams At Night	Tie plans for saving to your life-experience goals.
Feeling More Rewarded	Stop working at a job that doesn’t turn your crank and find one that does.
Feeling Like a Champion	Track saving plan and bucket-list successes.
Waking Up Excited	Be passionate and possessive with your day.
Sharing Your Happiness	Give, lead, coach, care, help, exemplify.

The Problem With Having A Job...

…is that for most people it is just a job.  I don’t think the problem is a fear of hard work.  In fact, I think most all of us want to demonstrate our strong work ethic and to derive value out of accomplishing things that are hard and challenging.  But when the expectations for hard work come from “above” for tasks and accomplishments that really don’t matter to us personally, I think the gap between our interest level and the pressure to perform as-if we care is the reason why people feel stressed in their jobs, and is the reason why most people yearn and pine for their 65^th birthday!

I’ve had a job before and I didn’t like it.  I liked the company and I liked the people I worked with, but I didn’t subscribe to the importance of the mission that would have been required to feel “wowed” by going to the office every day.  So I left and started my own business.  It wasn’t easy and it wasn’t instantly a moment of joy and happiness, but I never went to work not caring about my own performance because I cared very deeply about the work I was doing (and still do).

One of my favorite current-day thinkers is Seth Godin (http://sethgodin.typepad.com/ ) who wrote this on his blog today:

The people who successfully start independent businesses do it because we have no real choice in the matter. The voice in our heads won't shut up until we discover if we're right, if we can do it, if we can make something happen. This is an art, our art, and to leave it bottled up is a crime.

If starting your own business doesn’t speak to your sense of passion, then find work that does.  Just because you work for someone else’s ownership doesn’t mean your work can’t be a passion.  And if you get to work and feel energized by what you do, then you truly have a career and not just a job!

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.   

Nevertiree vs. Retiree

The reality for most families is that they cannot/will not save enough money during their working years to afford a completely independent retirement.  The realities when some people reach 65 look different than the dreams they had when they were 35.  That’s because inflation is a too-powerful influence on spending needs, the investment markets’ performances are too volatile and unpredictable, we are all living longer in retirement, and our consumption of goods and services inhibits high savings rates during our working years.

So it bums me out when I hear of retirees’ disappointment that their retirement years aren’t as they expected.  What I ask them when they tell me this is “what would you have done differently”?  Some people say that they’d start saving more earlier in their lives, which is great.  But even more people say what I think is the best advice for retirement planning.  They say, “I’d have followed my dreams”.  They would have chosen a different career.  They would have taken more risks.  They would have traveled more.  They would have tried different things. 

We can benefit from their experience.  This isn’t New Age woo-woo stuff, this is about you deciding how you are going to live.  Physically, spiritually, and financially.  There is no magic in planning your finances and there are only so many options for paying for a current and future lifestyle.  None of them are easy.  But it is no harder to plan your finances around living how you want than planning it to blindly follow a path that everyone tells you is “right”.

So I’m calling on people to stop planning for this:

·         Get a job. 

·         Hate the job. 

·         Save 1-2% of income. 

·         Can’t wait for retirement. 

·         Retire. 

·         Depend on Social Security and government programs.

·         Eke out a living for 25 years at just above the poverty line.

And instead, start planning for this:

·         Find a passion and pursue it as a means of earning a living.

·         Don’t save amazing life experiences for tomorrow.

·         Consider your investment portfolio as a depot for savings, not depending on it as a magical panacea for all of your future financial needs.  Because it won’t be.

·         Be a “nevertiree” where your engine of earning an income never shuts off.  Quit one job for another, work only 10 hours per week, start a business, make wooden toys, sell stuff on the internet, etc.  Just never quit.

Sharing Blessings Thru Finance & Economy

One of our most precious freedoms in the U.S. is the freedom of enterprise and the access to financial markets that leverage hard work and creativity into a way of life and standard of living that is unprecedented anywhere else in the world.  If you need a mortgage for a house, or a small business loan, or insurance, or a checking account, most all of us can get one.  Imagine for a second if you couldn’t. 

Did you know that 2.1 billion people live on less than $2 per day?  If that was you, how would you help yourself fight your way out of poverty?  How would you start your own small business?  How would you buy seed to start a farm?  How would you buy a cow to produce and sell milk? 

Fortunately, there are many different organizations and companies across the world that help people do just that – help themselves.  They do it by basically taking our great system of finance and economy and shrinking it into smaller points of access.  Where there is no economic system to support those who want to work their way out of poverty, the prolific (and growing) microfinance industry provides tiny loans and other financial products that help people get themselves out of despair.   

Microlending is not a handout.  Loans are required to be repaid and reports delivered to lenders and investors just like we do here in the U.S.  Microlending help is designed to help those who help themselves.  Want to learn more?  There are many fine organizations out there but www.kiva.org is one of the best and one of the easiest to follow and then help (you can support loan requests for as little as $25 and then you’ll be given progress reports on their repayment).  Here is my latest involvement as an example of ways that you can make an impact in someone’s life:

Magdalena Agsunod is from the village of Arcon in the Philippines.  She is 52 years old, is married and has seven adult-aged children.  To make a living, she owns and operates a general store, selling a variety of different products in the local community. She has been engaged in her business for over ten years and earns approximately $115 a month for these activities.  In 2008, Magdalena joined ASKI (a non-profit aggregator of micro loans) to gain access to financial services to help improve her living situation and ability to engage in business activities. Magdalena had been granted and has already successfully repaid a previous loan of 9,000 PHP (Filipino currency) from ASKI. This previous loan was used to purchase additional products to sell.

Magdalena is requesting a new loan of 11,000 PHP which will be used to purchase additional products to sell. This will be her 5th loan from ASKI. She plans to use the additional revenue generated from the business to financially support immediate members of her family.

The Danger of Retirement Planning

One of the ways I earn a living is by recommending that people save money for future goals.  So it might seem a bit incongruous to write that I believe that some people use retirement planning as a rationalization for life-experience avoidance. 

I meet with people who seem perfectly willing to be miserable in their jobs for 40 years because they believe they’ll be “living the dream” once they turn 65.  My problem with that way of thinking is that planning for retirement and living a great life until you retire should not be mutually exclusive.  Of the people I’ve met who are already retired, those who had a fulfilling pre-retirement life are having a fulfilling in-retirement life and those who had a crummy pre-retirement life are having a crummy in-retirement life.  Why is that?  Because the habits, choices, and judgments we make over six decades make for very strongly-entrenched personalities.  So if you believe that your retirement years are when you’re finally going to live differently and like you’ve always wanted, how do you expect to accomplish that? 

Good retirement planning doesn’t start with determining a targeted future sum of money that you want when you turn 65.  Good retirement planning starts with creating the habits now that lend themselves to living a lifestyle that you want for your entire life.  The only way I know how to do that is to start acting today like you want to live tomorrow.  So do you want to live a great retirement?  Then take this free retirement-planning advice:

1)      Find something you love to do so that retirement isn’t such a desperate yearning.

2)      Establish healthy eating and exercise habits now so you live longer during retirement and enjoy it as a healthy person.

3)      Don’t let your “bucket list” fill up too much.  Start crossing things off your list now.

4)      Travel.  Anywhere. 

5)      Decide that life experiences are worth more than dollars.

If you can do these things then you’ll be committed to proceed to the next step where you’ll build the financial component to support the lifestyle that you want to live.  Financial planning itself is not the objective, it is just a method of supplying you with the worldly means of pursuing happiness.  So if you choose how you want to live, we’ll help you with the plan for paying for it.