With the stock market reaching new all time highs, the temptation will be strong to believe that the rules that govern sensible and long-term investing no longer apply to you. Suddenly the 60/40 asset allocation that has served you well over the years will feel too conservative.
That strong pull you feel egging you on to take on more risk, that voice in your head saying go for it, that familiar feeling of adrenaline rushing through your body as you throw caution to the wind and gamble your nest egg away, all this and more poses unpredictable risk to your long term financial security.
Here are 3 investing mistakes to avoid in 2014.
1. Chasing Performance
Probably the most common mistake investors make is chasing performance. Come January, the usual suspects will publish their list of the 10, 20 or 50 biggest mutual fund winners from 2013. More common now is to slice and dice the winners into more categories than one can imagine.
These mutual fund winners from last year, if chasing performance is your thing, soon replace the core funds in your portfolio as you chase after returns. It’s a temptation many investors find too hard to resist. If they performed so well last year, surely they’ll perform as well if not better in 2014, right? Not always and many times, not even close.
One way to avoid making this mistake is to do what more seasoned investment managers, including myself, do, which is to analyze not just last year’s performance, but instead look at a funds 5-year and preferably 10-year track record. This is a much better way to analyze and judge performance then strictly looking at a one year snap shot.
Keep in mind, mutual fund managers do get lucky sometimes. Looking at last year’s performance only when making a serious investment decision is not doing your proper due diligence. Always check out the 10 year track record if that’s possible as that will be a much better indicator of future performance than last year’s performance. Here’s a link to Vanguard’s mutual fund performance to better illustrate this point: Note the disparity between year-to-date returns and 10-year returns. That’s what you’ll want to pay attention to overall.
“John Bogle, the founder of The Vanguard Group and a longtime champion of investing in index funds said recently that America’s retirement system “is almost rigged against human psychology that says [if] something has done well in the past, it will do well in the future,” “That is not true. That is categorically false.” source: bogleheads.org
2. Throwing Your Diversified Portfolio Under the Bus
With bond funds continuing to see record redemptions, the overwhelming impulse for many investors seeking long term growth will be to avoid bond funds all together in 2014 and put 100% of their portfolio into the stock market. With the S&P 500 looking like it’s going to have a record year, this strategy, on the surface at least, seems logical. But don’t fool yourself, doing this is risky business.
What many investors too easily forget is the sound reason and basis for developing and maintaining a broad diversified portfolio. What did well last year may underperform the following year. Large cap growth may have outperformed large cap value, small caps may have out performed emerging markets, short-term bonds may have out performed long-term bonds, etc.
Regardless of which asset class we’re talking about, it's much better to construct and maintain a well diversified portfolio than making the mistake of thinking you can outsmart or time the market.
3. Buying Investments on Margin
Before the market crash in 2008, buying stocks on margin, meaning you borrow money from your broker to purchase more stock than you have the cash to do, using your current investments as collateral, also known as utilizing leverage, was very common. Some brokerage firms even enabled their customers to purchase 3X the amount of stock they owned. So if you had a portfolio of $500k for example, you were able to leverage that portfolio and purchase up to $1.5 million of other investments.
The rules since the crash are no longer that loose, but it’s only a matter of time before we’re back to the bad old days of 2 to 3X leverage of your portfolio. Yes, of course, borrowing money against your portfolio provides you the opportunity to double or triple your profits. But as many investors found out the hard way in 2008, when the market turns south quickly, the ‘opportunity’ to lose 2 to 3X your portfolio value, (check out the movie Margin Call) happens as well. Call this what it is - gambling or speculating, but don’t call it long-term investing.
If you have a high propensity for risk, this temptation will be one of your biggest challenges to overcome. The thought of doubling, perhaps even tripling your returns feeds into your emotion of greed, and in this case, unlike the movie Wall Street, greed is not good.
To avoid this mistake, pay attention to what’s driving your emotional need to take on this type of high risk. With a stock market that seems to be headed in only one direction, up, it’s easy to forget how quickly global events can turn a market around on a dime.
Finally, do yourself a favor. Please bookmark this website: Bogleheads Investment Philosophy So when you’re feeling tempted to do something risky with your investment strategy, go back and read these investing pearls of wisdom as many times as needed and get back on track to being a smart and savvy long-term investor.
The following definition of ‘fiduciary’ is taken from the Center for Fiduciary Studies, fi360 website:
"An investment fiduciary is someone who is managing the assets of another person and stands in a special relationship of trust, confidence, and/or legal responsibility. The word “fiduciary” comes from the Latin word “fiducia,” meaning “trust.” An investment fiduciary is held to a standard of conduct and trust above that of a stranger or of a casual business person due to the superior knowledge and/or training of the fiduciary."
In the past, I've written a couple of blogposts about the various financial designations one can encounter in the alphabet soup of the financial services field. But as an investment manager, being a fiduciary is a very important designation to understand. The following list of five questions you should ask your advisor is taken from the Center for Fiduciary Studies, fi360 website.
Five Questions You Should Ask Any Advisor
Some advisors always operate in a fiduciary capacity, others only act as a fiduciary for certain specified services, and yet others are not permitted by their company to take on the obligations of a fiduciary at any time. In order to better understand the standard of care your advisor is providing you, ask the following questions:
1. Will you put my best interests above all others?
2. Will you act with prudence; that is, with the skill, care, diligence and good judgment of a professional?
3. Will you provide conspicuous, full and fair disclosure of all important facts?
4. Will you avoid conflicts of interest whenever possible?
5. Will you fully disclose and fairly manage, in my favor, unavoidable conflicts?
An advisor should be able to provide clear and concise answers to all of those questions and be willing to disclose that information in writing. In addition, any AIF® Designee should be able to describe how their relationship with you will operate and list the resources and tools that are incorporated into their business practices.
If you have any questions about my role as a fiduciary and what you can expect in our work together, please feel free to contact me - I'd be happy to illustrate the benefits of working with an AIF designee.
Like most financial advisors that have been in practice for over ten years, I have my fair share of clients that are millionaires. So with that said, what makes our millionaire clients different than your “average run of the mill” millionaire client? The answer; the majority are frugal and proud of it.
If you’ve read the best-seller, The Millionaire Next Door, you know many of the people portrayed in the book are, relatively speaking, pretty frugal. Keeping that thought in mind, and based on years of observation, below are the seven most common frugal habits of Spiritus millionaires.
1 - Living Below Your Means
As your income rises, so do your lifestyle expenses. That’s the American way, right? Not for Spiritus millionaires. They consciously live below their means. The habit of saving money, lots of money, is deeply ingrained in their psyche.
Being frugal is a habit that comes naturally and easily for these clients. The ability to absolutely control their spending leads to higher self-confidence around their money habits. And it’s that higher awareness, that knowing that you have mastered cash flow 101 that creates the feeling of financial empowerment, which ultimately, at the end of the day, is how these millionaires stay millionaires.
2 - Seeking Symbols of Abundance
When was the last time you picked up a coin from the ground? Whether it’s a shiny quarter, thin dime, nickel or penny, think about it, when was the last time you not only spotted a coin but actually stopped to pick it up?
One of my favorite clients, a physician in Colorado, keeps track of every cent he finds and gathers. His income is ultra-high, yet he will not hesitate for a second to pick up any coin he spots. On top of that, he tracks his findings in Quicken annually. For fun, we actually compete to see who has found the most money at the end of each year.
These coins you spot and find are obviously not going to change your financial life, but seeing them as symbols of abundance, being thankful for those symbols continually showing up in your life keeps the abundance flowing and keeps these millionaires grounded and centered.
3 - Avoid Paying Retail Prices
This habit is probably the most common trait I’ve observed. Whether it’s finding bargains on Craigslist, gadgets on eBay, travel using vrbo.com or airbnb.com, checking the library instead of Amazon for the latest best-seller, our frugal millionaires are well aware of how much money they save when seeking better value for goods and services.
4 - Spending Money = Spending Life Energy
If you’re a fan of the best-seller Your Money or Your Life, then the term ‘life energy’ is very familiar to you. Think about your life energy as your precious time on this planet.
Now think about how you consciously or sometimes unconsciously trade/exchange your life energy for money. You take your most precious and valuable asset, your time, and you exchange that time for money. Surely knowing the value of that exchange develops the habit of spending your money very wisely and prudently.
5 - Will Splurge When Warranted
For some, the word frugal is another way of saying your cheap. I could not disagree more. Being frugal is about stretching the value of the dollar you earned. Cheap has nothing to do with that equation.
One of my millionaire clients recently purchased a brand spanking new Tesla. Another just spent a small fortune inviting and also paying for his close friends and relatives to join him in Hawaii for his 50th birthday celebration. On and on I could go. The habit of treating yourself, splurging even when desired, is a habit that keeps the money flowing into your life. It’s grounded in the belief that the more you give, the more you receive.
6 - Money Aligned With Your Core Values
Aligning your money with your core values is a habit that takes time to build and sustain, yet one that continues to reward year after year. Think about it as developing and fine-tuning your internal moral compass.
For our frugal millionaire clients, this habit is non-negotiable. They know staying in money harmony and keeping balance in your life allows you to continue to not just survive but thrive. Practice makes the master with this habit. Soon enough, before you know it, your intuition responds instantly to your financial decision making and your inner guidance system automatically points you in the right direction.
7 - Having a Plan and Sticking to it
How did our frugal millionaire clients become wealthy? They had a plan and they stuck to it. Planning is a habit that takes time to cultivate as it does not come naturally for most people. It begins with tapping into your imagination, visualizing the future you intend to create in bright colors then putting your plan into action.
Sticking to your plan is about your capacity to be resilient. It’s an inner awareness that setbacks are learning opportunities and signals that allow you to course correct. Because your plan is strategic, you take comfort in knowing where you’re headed, how you’re going to get there and how you can get back on track if needed. Ultimately, having a plan and sticking to it is the ‘secret sauce’ if peace of mind is your ultimate destination.
Image credit http://www.flickr.com/photos/peddhapati/
In the hyper consumer society we live in today, buy now, pay later has become the norm. Saving enough money for a secure retirement all too often takes a back seat to the immediate gratification of purchasing the shiny object in the window. Practicing the concept of delayed gratification - fuhgeddaboudit.
One day though, perhaps in your 40’s or 50’s most likely, as you take stock of where you are financially, you very well may discover your savings and investments are not even close in terms of what’s needed to fund the lifestyle you desire in retirement. And if you’re like most people that have not saved enough, you may decide to play the catch-up game.
It’s human nature to procrastinate, especially when it comes to saving for retirement. But by not making any sacrifice’s today for a future you desire tomorrow, you end up playing high stakes poker with your retirement security. Below are five reasons why this risky strategy often backfires:
1 - Time is not on your side
Being able to take on more risk with your investments when in your 20’s, 30’s and early 40’s, assuming you work until your mid 60’s - then time IS on your side. Investing is a long-term proposition and with a time horizon of 25+ years before retirement, you’re able to invest more aggressively and potentially receive higher returns over the long run.
It's better late than never to start finally buckling down and begin earnestly saving in your 50’s, yet the problem you face is a shorter time horizon and less ability to take on more risk. As a result, there’s a missed opportunity to potentially earn higher returns which could result in less income than desired at retirement.
2 - Putting it all on black or red
Perhaps the riskiest strategy of all when playing the game of catch-up is attempting to increase your returns exponentially by concentrating your total investment positions in one stock, or one mutual fund or gold, or silver or you name it. You throw the concept of diversifying your portfolio out the window. You double or triple down, make your bets and pray for good luck.
At this point, you’re no longer an investor. You’ve become a speculator/gambler. You could possibly score big, but you’re more likely to lose big. And the obvious problem is that what you’re risking is your future.
3 - The future is unknown
Playing catch-up inherently comes with lots of assumptions - assumptions more often than not you will have zero control over. So banking on the fact that you will continue to earn the income you need, that your health will stay strong right up until retirement, that there will be no curve balls that disrupt your plans, these are plans made on a wing and a prayer.
When developing comprehensive financial plans for clients, we assess all possible outcomes and come up with contingency plans when worse case scenarios unfold. The problem you face when playing catch-up is that usually your assumptions only take into consideration best case scenarios. This is a dangerous proposition often caused by an inability to face reality and course correct.
4 - Decision making becomes constrained
Having the opportunity to make long-term financial decisions is a major ingredient of successful retirement planning. It affords you the luxury to think big and enables you to leverage perhaps one of your greatest assets - time.
On the other hand, if your time horizon for investing is much shorter than is needed, as a result, your options are limited, your decisions are constrained and the odds of reaching your retirement goals are greatly diminished.
5 - Banking on an inheritance
This is perhaps the most common mistake I’ve seen people make that have not saved enough for retirement. Thinking an inheritance will come to the rescue is wishful thinking. Yes, many times an inheritance you expect does come through, yet more times than you can imagine, it does not.
Unless you’re 100% guaranteed that the money you anticipate inheriting will be there, planning on this as your fallback position and using it as an excuse not to save more and spend less could end up wrecking your dreams of retirement.
When developing a financial plan for clients, we’ll usually take their anticipated inheritance and lower that estimate by 50%. Even then I’ll recommend not having their retirement security hinge on this money.
Key point - the sooner you assess where you are today financially, the more time you’ll have to plan accordingly. As the saying goes - just do it!
Photo credit http://www.flickr.com/photos/losmininos/
If you’re like most people near or currently in retirement, you’ve spent most of your adult life managing your personal finances to the best of your ability. You’ve witnessed your share of stock market crashes, often referred to euphemistically as “market corrections”, you’ve saved and hopefully invested well, and you’ve done what’s needed to have a nest egg large enough to never have to worry about running out of money during retirement.
Then the day comes when you say good-bye to your career and ride off into the sunset of your prime years. Perhaps initially you decided to manage your investments in retirement yourself without the guidance of an investment advisor like many people choose to do.
Let’s assume that your life partner was not in favor of you managing your investments during retirement, seeing the benefit of you not needing to worry about the stock market any longer, hoping that you could after all the years of taking on this major responsibility and doing it well, allow someone else to now take on the responsibility for you.
“Let someone else worry about the stock market ups and downs, time for you to relax and let that go”.
“Maybe down the road honey, but for now, I’m going to manage our investments and I promise to not to let the ups and downs affect my mood as much, promise”.
Meet Mr. & Mrs. Jones
The above conversations did not happen exactly word for word, but pretty darn close as confirmed by Mrs. Jones. Of course I’m not using their real names. Mrs. Jones taught high school math in Berkeley for over 25 years. Mr. Jones was a sociology professor at UC Berkeley for close to 20 years. Both retired last year.
During our financial planning meetings as we designed their retirement plan, it was evident to me that a major flashpoint in their relationship was managing their investments. Mr. Jones had definitely done a good job managing their portfolio but his wife was concerned with the amount of stress he seemed to be living with, especially every time the stock market dropped significantly.
She also voiced her concern during our meeting that her husband’s moods seemed to be directly correlated to the ups and downs of the stock market and more worrisome, his seeming addiction to watching CNBC and checking their portfolio on the web a few times a day was driving her crazy.
What broke the camel’s back, so to speak for her, was a pre-retirement vacation they took last year in Maui. Although her husband promised he would not check their portfolio or watch CNBC during their 2 week vacation, he broke his promise many times, saying he needed to do it because of x, y and z, complaining to her that she just didn’t understand, that this was something he had to do and she was going to just have to get used to it. Oh boy! As she recounted this encounter during our second planning meeting, it was obvious to me they needed a new way forward, as this back and forth was not working for them.
Outsourcing Your Investment Management
It was not an easy decision for Mr. Jones to agree to provide me the opportunity to manage his investments and that’s totally understandable. He also knew that continuing along the path he was on was creating unneeded conflict in his marriage. So together, they made a decision that beginning January, 2013, I would take on the responsibility of managing their investment portfolio.
Was it easy for him to give up control? No way. Did he second guess his decision quite a few times during the first quarter of this year? You bet he did. Did he call me once a week for the first 2 months of the year to ‘check-in’? Yes. But as we got to know each other better and build the trust crucial for a successful relationship, little by little he began to let go and enjoy his newfound freedom.
All I needed to do was simply put myself in his shoes and understand this was really a hard call for him, have some compassion and humility and show him that working in a fiduciary capacity meant that I would always put their best interests first, period, full stop.
Living the Good Life
The inspiration for this blog was due to the call I received from Mr. Jones yesterday. You see yesterday I sent out an email to all my investment management clients informing them of my latest take on the shutdown and the impending debt limit situation we’re facing and my strategy for dealing with this uncertainty.
Mr. Jones called and he was practically giddy. He was concerned about the spectacle in Washington of course, but his giddiness was for another reason. See he knew that worrying about the current stalemate in Washington and the collateral damage that it could have on the stock market was not his problem any longer.
As he said to me yesterday on the phone: “Mark, I couldn’t be happier you’re on top of this and I don’t need to worry about it. I’ve outsourced my money worries to you!”
He’s no longer watching CNBC. He feels no need to watch the stock market throughout the day. His health, specifically his blood pressure has come way down, he’s sleeping better than ever and his relationship with his beloved wife of 30+ years is better than ever.
Next week they leave for a trip to Vancouver and as he often says to me during our quarterly meetings; he feels like he’s living the good life. Not needing to feel compelled to watch every tick tock of the stock market has liberated him from a challenging problem and he’s a happy man to boot. To me, his words are priceless!
photo credit http://www.flickr.com/photos/thegsayeth/
If you’re a fan of the New York Times bestselling book Your Money or Your Life - Transforming Your Relationship with Money and Achieving Financial Independence, it’s likely that 'achieving financial independence' (FI) part of the title that initially sparked your interest in deciding to read this seminal book on money.
But whatever the reason, as you find yourself dreaming and visualizing about financial independence you may also feel burdened and thrown off track by obstacles that are in the way of becoming FI. As you sit in yet another two hour commute to get to a job that drives you crazy, as you go through the third re-org in two years or get your fourth new direct report in two years or feel those crappy Sunday night blahs as you think about going to work Monday morning - as crazy as it sounds, these are all blessings in disguise.
Why are events that cause you such stress and frustration blessings in disguise? For the same reason most challenges, hurts and sorrows are often blessings and lessons. Being on the road to financial independence is no different, and if you are looking to achieve FI earlier than most, be prepared as you will run into hurdles and difficulties that will test you. Keeping the faith on the road to financial independence requires perseverance, discipline, trust and perhaps most importantly, resilience.
In the beginning of your journey to FI, you will second guess yourself and the decisions you need to make.Yet every time doubt seeps in to your mind, these blessings in disguise will be the prime motivators that help you overcome obstacles. That burning desire to be free, to choose how you will spend your precious life energy, to work in a profession or career that inspires you, to wake up and ask, how may I be of service, these are the rewards that come to those that set an intention to live the life they desire.
Dwell in Possibilities
There are many roads that lead to financial independence. The possibilities of how to create a financial road map that illustrate step-by-step how to reach this life goal is where the art and science of financial planning come in to play.
Through a holistic discovery process that aligns your core values and aspirations with your money and your life, construction of a financial plan begins in earnest that slowly but surely maps out the financial strategies that take you from where you are today to where you want to be tomorrow.
Your financial plan is customized to fit your lifestyle and individual situation. Some clients prefer to take the superfast highway to reach FI, some will take the regular highway while others want a few pit stops on the road to FI while still others want to take the slow road as long as they know they’re on track.
For too long, in my humble opinion, financial planning has meant boring numbers on a spread sheet or financial lingo and jargon that puts most people to sleep. But as Dylan sang, ‘the times, they are a changin’.
Clients that seek out my financial planning services are interested in a deeper and more holistic discussion around their money and their life. They want to explore the many options and possibilities life has to offer. They want money to be their servant, not their master and perhaps most importantly, they want, maybe for the first time or in a long time, their money and their life to be in alignment with their core values. Because they know that when there is money and life alignment, there is financial integrity and authentic power that fuels their desires.
To dwell in all the possibilities…..that’s your starting point when aiming for a goal such as early financial independence. It’s your imagination and visualization that will play a pivotal role when designing your financial plan. Too many of us have been conditioned to aim low when setting life goals. Why not aim high? Mark Twain said it best:
Twenty Years from now you will be more disappointed by the things you didn’t do than by the ones you did. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails.
Photo credit http://www.flickr.com/photos/artotemsco/
If you’re among the millions of boomers beginning to plan for retirement, you’re most likely feeling a range of emotions that may range from euphoria to downright fear. Nonetheless, as you begin to prepare for this next phase of your life, step one is assessing where you stand financially right at this moment.
Yet on the road to assessing your financial readiness for retirement, unexpected events could occur that rock your world and change your life in ways probably unimaginable to most people. The story below actually happened. Names have been changed but events that occurred are unfortunately real.
Lois & Ben are both in their mid-50’s and after putting their two kids through college, they began thinking about their retirement prospects. Lois reached out to me about two years ago, she wanted to get started developing a financial plan, but Ben wasn’t ready. That’s very common by the way and I’ll always recommend it’s best to wait on comprehensive financial planning until you’re both on the same page.
Earlier this year, Lois called again, but this time the enthusiasm she initially expressed during our first call, her excitement of getting their financial house in order and mapping out their future life plan was gone. This was a sad call and briefly, here’s what happened.
After my first call with Lois nearly two years ago, she asked for a check list of financial documents that would be needed in order to develop a comprehensive financial plan. Not surprising to me, she held on to that check list and January of this year started gathering the info she knew she needed. She told me her new year’s resolution was to develop a financial plan and she was highly motivated.
She said Ben handles all the investments for the family, she pays the bills and manages month to month cash flow. So Lois started the project by gathering up all their investment statements. She had easy access to her 401k statement from work, but everything else, all their other investment statements, she would need to ask Ben for.
Money Secrets & Feelings of Betrayal
As it turns out, the reason Ben was reluctant to engage a financial planner was due to a big and destructive secret he was keeping. Ben was a closet day trader. I say closet because Lois knew nothing about his secret trading (gambling) activities nor as Lois later discovered did any of his close friends.
While Lois believed they had approximately $1 million total in their various investment accounts, the truth was not even close. Over the past four years, Ben had lost nearly $800k of their savings. On top of that, he had used a margin account to leverage his stock trades and owed another $150k to his brokerage account. What they actually did have now in terms of retirement savings was around $50k. A far, far cry from the million plus Lois was certain they had accumulated over their 25 years of marriage.
Sometimes these tragedies end with somewhat happy endings. Often times there will be a good amount of marriage counseling, lots of healing and forgiveness and an ability to let go and rebuild. Not in this case. Lois and Ben are now formally separated and Lois has every intention of filing for divorce.
Her call to me was not about her and Ben doing a financial plan together, but about how she could move on an rebuild the financial security she thought she once had. Her life dreams, her dreams of retirement she had imagined for so long were shattered to pieces. She said she felt totally betrayed by Ben. Her heart was broken but she’s a fighter, and with some help, she will bounce back.
Why share such a sad story when there’s not a happy ending? Because maybe, just maybe, someone reading this blog that’s keeping money secret’s will realize how vital it is they come clean. Will it guarantee your relationship stays together? It will not. But it’s the right thing to do not just for your partner, but mostly for yourself.
I called Lois last week and asked her if it would be ok to write a blog about her painful experience. She said yes immediately. Through a lot of work she’s doing with a spiritual advisor, she’s starting to believe this event was divine intervention. She hasn’t changed her mind about divorce, but is working on forgiveness.
As she said during our call; “What if I didn’t discover Ben had a gambling addiction until ten years from now? How much worse off I would be. At least now I have a chance to rebuild my life.”
What we all need to remember about retirement dreams when we’re in long-term loving and committed relationships is this - these are shared dreams, shared hopes and shared aspirations of the future. Trust is the glue that keeps relationships together through the good times as well as the bad. Betray that trust and you risk not only ruining your life, but the life of the person you so deeply love.
Photo credit http://www.flickr.com/photos/fairyheart/
This description is taken from Wikipedia:
"Holistic health is a concept in medical practice upholding that all aspects of people's needs, psychological, physical and social should be taken into account and seen as a whole. As defined above, the holistic view on treatment is widely accepted in medicine."
When I began my practice over 10 years ago, I followed the holistic medical model. Like many solo practitioners, I started off giving talks in various local venues, the most powerful were at the Integrative Medical Clinic in Santa Rosa. We developed a series of talks we called Financial Wellness and from that time to present, I have incorporated those holistic health principles into my practice.
All areas of our financial lives should be looked at holistically and retirement income planning is no different. Here are 3 reasons why you should consider the holistic model when approaching or entering retirement.
1) Your joyful life depends on it
As you make the transition from working most of your adult life to suddenly being “retired’, if history is any indication, many of you are going to take a ride on the emotional rollercoaster of your life, loaded with twists and turns you can barely imagine in your wildest dreams.
Although each client’s ‘transition story’ is unique in terms of their actual experience, most clients have been willing to share with me their true feelings about what it’s actually felt like emotionally, especially during the first few years, when they made the leap from full-time work to retirement.
And here’s what I found most intriguing about their compelling stories. Money, money concerns/stress, was not an issue at all in terms of adjusting to their new lifestyle. That’s because right up until the day they officially said adios to their job, career, sold their business or practice, they were following a carefully developed, regularly monitored and updated, strategic financial roadmap we co-created that made it abundantly clear all systems were go from a cash flow point of view.
Where they ended up deriving the most comfort was from the work we did together during our pre-retirement planning sessions. This entailed modeling various what-if scenarios that not only focused on their money but their multiple lifestyle choices they would soon be facing and challenged with such as….
- Will you or your partner feel the urge to reinvent yourself and launch a new career?
- Will one of you want to pursue your passion of volunteering for a cause near and dear to your heart that you did not have time to pursue when working full-time?
- Will you both, or will one of you want to take up a new sport or set off on exotic travel or perhaps living part-time in other countries around the world?
- If a couple, how will you structure your time together and not drive each other crazy now that you’re together all the time while at the same time ensuring enough time for your individual personal development and growth?
These are just a few of the many vital topics we discuss during pre-retirement planning. And instead of following the old and stale retirement planning model which focuses almost exclusively on how to manage your investment portfolio and how much you can safely spend each year - a much deeper, thoughtful and respectful holistic discussion of your money and your life increases the odds your transition to the new world of retirement will be a success and life will feel joyful.
2) Your happy marriage/partnership depends on it
For lots of people, the word retirement conjures up all sorts of negative and often scary feelings. Instead of being excited and inspired by all the options and possibilities this next phase of your life has to offer, often just the opposite occurs and those same options that makes one person in a relationship leap for joy could make another person feel very anxious.
The old ‘Mad Men’ model of retirement planning looked at couples as one unit and in most cases, back in the day, women had very little input if any. The new breed of retirement planning focuses on each person in the relationship as an individual first and as a couple second.
Each person’s unique relationship with money, their money history, their money story, their long held dreams and aspirations, their fears as well as their hopes are all brought to the forefront without judgment and with understanding and empathy.
It’s at this point, when both partners in a loving and committed relationship truly understand not only where their mate has been in terms of their relationship with money, but where they may be headed, that money harmony and true peace of mind around your combined future is yours for the taking.
It all begins with listening, maybe for the first time in a long time, to what’s really in your partner’s heart, to make your shared vision and dreams of a joyful future together become your reality.
3) You will become fearless and empowered
If you’re someone that has worried about money most of your adult life, get ready for the olympics of money worrying as you transition to retirement. Because so many of us lead busy lives, consumed with raising families, earning money, hopefully planning for the future, there’s scant time left to worry about money.
As you move from a very productive and busy lifestyle to one loaded with much more free time, you’ll have more than ample time to worry about money. And again, if you’re a money worrier by nature, this old habit will be happy to take its place front and center in your life and demand your attention as often as it feels like. Instead of feeling empowered, money worrying has the complete opposite effect of making you feel disempowered.
Will holistic retirement income planning alleviate all your money worries immediately? Not even close. But like an organic vegetable garden that has not been tended to for a very long time, that richness that lies buried beneath the ‘worry weeds’ and years of neglect is fertile soil, waiting for new seeds of abundance and prosperity to be planted.
Little by little, baby step by baby step, this once neglected garden of money worries is being replaced with a garden of self-empowerment and fearlessness. As your relationship with money gets stronger and healthier, so does your internal garden of abundance and prosperity.
This new inner self-confidence you begin feeling around your money and your future slowly but surely begins taking the place of the usual habit of worrying. One smart financial decision after another smart financial decision after another is the nourishment you feed your inner garden. As this garden grows and becomes vibrant, so does your sense of empowerment and fearlessness around money.
And before you know it, you have broken the habit of worrying about money. You now are able to see all of life’s possibilities. For you, the journey of life has just started, and this time around, your money worry habit is not invited. Bon voyage!
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Whether you're shopping on-line for a TV or a hotel room - it's getting increasingly difficult to find the best deal out there.
In a recent New York Times article, it was reported that depending on the browser you use while shopping on-line, there can be a considerable difference in pricing from browser to browser for the exact item. In an article written by Stephanie Clifford, retail reporter for The New York Times, she stated:
"Even the Web browser a customer uses can make a difference. The Web site Digital Folio, which shows consumers price changes, did side-by-side comparisons of televisions. On Newegg using the Chrome browser, the firm was offered a $997 price on a Samsung television. Using Firefox and Internet Explorer, the price was $1,399." That's a $400 difference on just one item.
(If you are a Mac user, you'll want to read what Orbitz has to say about why you should be paying up to 30% more for your hotel room than a PC user would pay for the same room.)
But even if you aren't a big shopper, eventually you're likely to make on-line purchases and you don't want to get stuck paying more than you have to. The solution, says consumer advocate Clark Howard, is to fight back with technology, by comparing prices using sites like Decide, Hukkster and Invisible Hand.
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If you’re the type of person that’s a planner by nature, then most likely you’re also good at establishing financial goals grounded in reality, goals that are achievable, and that also require a bit of a stretch. After all, if you’re goal oriented, setting goals that are too easy to reach can’t compare to the thrill of reaching or exceeding a personally challenging goal.
On the other hand, if you’re like the majority of people that find goal setting, especially financial goal setting, and extra especially long-term financial goal setting a skill challenging to a point of inaction, then please read on. And keep this in mind. Don't be afraid to set goals for yourself. A goal is a dream with a deadline, as they say, and with that mindset you're that much closer to your dreams.
Below are five tips that will help you become a winner at setting your own personal financial goals. And remember, practice makes the master.
1) Goals must be in alignment with your core values
Setting personal financial goals need to be more than just numbers or targets to reach sometime down the road. Instead, think about your goals as a personal expression of where you plan to focus your attention and intention. By making sure your goals are aligned with your core values and your dharma, you’ll be tapping into a higher power that will help you succeed in ways that are unimaginable.
2) Know your enough point when setting long-term financial goals
Knowing when enough is enough is a crucial element when setting your long-term financial goals. Coming up with your enough point requires contemplation, inner reflection and absolute self-honesty. For example, having realistic goals that help you reach financial independence (FI) need to be grounded in reality and offer enough challenge to keep you motivated over the long-term. Once you have established your enough point for FI, make sure to set quarterly and yearly milestones, keep your eye on the big picture but focus on the quarter to quarter, year to year goals to keep it real.
3) Singles and doubles still win the ball game
When setting financial goals, many go for the grand slam home run. Their goals need to be larger than life because after all, who doesn’t want to have big, lofty goals? The problem with these type of goals is that they are often unrealistic and not grounded in reality. It's far better to set goals that offer a little or a lot of stretch but are attainable and realistic. Maybe it’s saving a little extra each month or adding a little more each month to your 401k or IRA contributions, the singles and doubles of goal setting if you will. Small wins, whether monthly or quarterly will keep you motivated and help you stay on track.
4) Financial goals need to be about the positive, not the negative
Here’s where semantics intersects with reaching your financial goals. According to many psychologists that study behavioral finance, we humans have a far better chance of reaching our financial goals if for example we set a goal to save more instead of a goal to spend less. It's true that both result in the same outcome, but our brains and emotions react much more powerfully when we’re aiming our goal towards something positive, like a higher amount of savings each month as opposed to something we may perceive as a negative, such as spending less. Go with the flow and watch how much easier it is to achieve your goals.
5) Monitor, measure and course correct when needed
Once you’ve established your financial goals, both long range as well as short range, it’s essential you establish a regular schedule for monitoring and measuring your progress and course correcting when you go for an extended period of time without attaining your goals. Personally, I prefer checking in on goal progress on a quarterly basis. How you decide to schedule your check-ins are up to you, but never go more than a year without seeing how you’re doing. When you reach or exceed your annual goals, make sure to celebrate what Stephen Covey describes as our personal victories. Give yourself a pat on the back and rejoice in your success.
Action Step: If by chance you still feel like you need a little more guidance or structure establishing your financial goals, there’s no better book to read to help you than the classic best seller Think and Grow Rich, written by Napoleon Hill.
Don’t let the title fool you by thinking this is a get rich quick kind of book. Nothing could be farther from the truth. Written during the depression, it offers an elegant step-by-step guide on how to set your personal financial goals, how to use the power of auto-suggestion to plant seeds of abundance in your subconscious and how to use your power of intention to turn your dreams into reality. My goal is to listen to the audiobook version once a year. Why not set a goal to read or listen to this seminal book yourself?
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