Think about the last time you wanted to do x and your spouse or life partner wanted to do y. How did you resolve your conflict? Did you both play fair when negotiating a compromise or does one of you always ‘win’? And if one of you usually gets your way most of the time, is it because he/she is the one that makes more or perhaps all the money in your relationship?
What happens if you’ve been the breadwinner throughout your relationship, but now your spouse/partner has inherited a significant inheritance? Suddenly you find yourself on a more level playing field, financially speaking. Instead of getting your way, as usual, in terms of money decisions, you now need to learn or relearn the art of negotiating with your life partner.
Couples and how they earn, spend and invest their money come in all shapes and sizes. Beyond that, you have to recognize that each person in a long-term relationship has their own money story, core beliefs and many times ‘baggage’ they bring into the relationship.
I Married for Better or Worse But Not for Lunch Every Day
Fast forward through life and now you’re both in your first year of retirement. It’s been a little clunky the first couple of months as you get adjusted to seeing each other every day. There were quite a few loose ends to sort out, but now all that has been taken care of and on to the next phase of your life. Or so you hope….
And then, it happens. You have your first conflict around money since you both retired. Having already developed a retirement income plan prior to launching into retirement, you know precisely the amount of discretionary funds you can use for travel and entertainment. You call this your fun money and you’re eager to spend it albeit, wisely.
Next, imagine you’re the one that earned less, perhaps much less than your spouse during your working years. When you reached financial flashpoints in the past, you quickly learned when to ‘hold-em’ and ‘when to fold-em’. Because he/she earned much more than you, had a far more stressful job than you, and although many times you wanted x and he/she wanted y, as the peacemaker in the family, you went along to get along and keep the peace.
But now, your time has come. No longer are you content being the one that usually lets your spouse get their way. Years and years of not saying yes to yourself, of doing what you knew in your heart was the right thing to do and for all the right reasons; well today’s a new day, it’s your turn, and you’re ready to say yes to yourself, full stop, end of story.
Yes + Yes Wins the Day
As ready as you are to become more assertive, to stand up for yourself and express your desires clearly and passionately, you realize that making up for all the times you didn’t get your way when it came to a money decision by now getting your way all the time is a losing strategy, bound to end in conflict and sore feelings.
I’m not suggesting negotiating with your spouse or life partner is going to be an easy conversation, because it’s not. Often times you’re out of practice and fall into your pre-retirement roles by default. But just like early on in your relationship, there are always differences to adjust to and compromises to be made as you plan for retirement.
But isn’t that the exciting part of growing old together? It’s an opportunity for a fresh start, exciting new changes and opportunities to grow and expand together. It’s a chance to reinvent one’s self as individuals and as a couple as well.
I recently came across an excellent book on retirement called The Couple’s Retirement Puzzle: 10 Must-Have Conversations for Transitioning to the Second Half of Life, by Roberta Taylor and Dorian Mintzer.
The authors are relationship therapists and retirement coaches, which is an excellent combination for the millions of baby boomers getting ready to, or have already retired. This book can help you in mapping out how to live your retirement years in money harmony, some would call it ‘money heaven’, with your partner.
Don’t expect to read the book and have all the answers immediately. The real work is in talking with your partner and having real discussions – arguments and all. Don’t expect to see eye-to-eye on everything, but look at these discussions as series of steps in designing the next chapter in the life you’ve dreamed of.
And remember, the goal when deciding how to spend your money in retirement is to seek and find common ground at all times. If a financial decision, whether large or small, results in a yes and no, back to the negotiating table you must go, because retirement happiness and success is all about a yes and a yes.
Photo credit http://www.flickr.com/photos/adulau/
Think about how many years of your adult life you spend accumulating enough money in order to have financial security and the lifestyle you desire when you stop working for money. You do your best, save as much as possible, live within or below your means, fund your retirement accounts, maintain a low cost, well diversified investment portfolio, and then the big day arrives, and you say adios to your job, career or business.
Suddenly, all those years of saving and accumulating come to a screeching halt and instead of being in the accumulation phase, you now move into the distribution phase with your money. On paper, theoretically, this all makes sense, right? Your nest egg now needs to last your entire lifetime. No worries, right?
In the nearly 11 years of specializing in retirement planning, I’ve yet to see an individual client or couple not initially have a minor freak out session once this reality sets in. And these sessions are equal opportunity offenders regardless of net worth.
I’ve observed clients with many millions in the bank initially get just as stressed and worried about running out of money down the road as clients with much less saved up. It’s why I pay particular attention to the emotional aspects of this life transition. When you go from working full-time and collecting your paycheck regularly to suddenly being labeled as “retired”, the emotional impact is often striking.
For better or worse, we tend to derive much of our self-worth from not only what we do and what we have, but even more importantly from our net-worth. For men especially, this loss of career identity along with no longer receiving employment income to validate our self-worth and self-esteem creates a double whammy.
In talking with many of my now retired clients that made the transition successfully to the ‘other side’ they recall feeling lost and out of sorts the first few months of making the transition. For many, second guessing whether they retired too soon seems to be the most prevalent feeling. Usually, by month four, the majority of my newly retired clients have got their mojo back and most seem to adapt and move forward pretty successfully.
Meet the “Joneses”
For 35 years, Cindi and Emily 'Jones' watched their spending and pinched their pennies, all to be able to retire one day with few financial concerns. They read the seminal book on money, Your Money or Your Life, back in 1992, and were determined to be smart with their money. The mortgage on their Berkeley home was paid off in full two years ago, they have zero debt and drive cars that are five and seven years old respectively. They are frugal meisters without a doubt. And as with a few of my other clients, we compete annually to see who has found the most money during the past year.
Last August they were married and the following month they both stopped working for money. Although technically ‘retired’, they prefer not to use the ‘R’ word. The retirement income plan we developed has them withdrawing approx. 6% from their joint savings for the first 5 years, then it begins to gradually taper off but remain dynamic. Although many financial advisors suggest a maximum withdrawal rate of 4% annually, Laura and Emily wanted a more customized and dynamic spending plan that meshed closer with their lifestyle. That was music to my ears.
These Joneses do not worry about running out of money and here’s why.
- They have owned investments during periods of bad economies and bad markets. They have made good decisions and bad decisions and learned why their choices were either good or bad. This gives them confidence in their investment plan and should allow them to maintain a balanced portfolio indefinitely.
- They have the ability to reduce their expenses without having to limit their lifestyle. Most of their spending is truly discretionary and because they have strong money management systems in place, they can feel comfortable employing the dynamic spending plan we developed rather than a rigid one-for example, a 4% annual withdrawal model.
- Because they have flexibility in their spending, they do not believe they need a high level of certainty to proceed with the spending they currently enjoy.
- Perhaps most importantly, we have done real comprehensive financial planning together. This helps them better understand the range of possibilities and the trade-offs that apply to their decisions. Financial planning is a collaborative ongoing process, not a onetime event. They know we will revisit our assumptions and incorporate whatever changes may come.
Lastly, what has garnered the most confidence is that we have identified the trigger points that would warrant a scaling back of their withdrawals. This will be important if we hit a down stock market again, if they underestimate their spending or if future returns are as low as some believe they will be. We have also identified trigger points to resume higher spending levels should the couple experience better-than-expected results.
The planning work we have done together doesn’t offer any of our analytics as a crystal ball. It simply identifies what can get off track and exactly what we should do about it. The Joneses in other words are prepared.
There is an adage in life, “Pressure is something you feel when you are not prepared”. Well prepared Spiritus clients embarking on retirement can enter the unknowable future with confidence that they can adapt to whatever may come their way.
Photo credit Martin Abegglen
I am pro-dream. There, I said it.
Of course, I kid, but seriously folks, what’s up with the lack of dreaming going on? I kid half-heartily because somehow, someway, many potential clients I meet have either forgotten how to dream or dare not utter the d-word.
Is there a mysterious anti-dream organization operating in stealth mode around the country zapping people of their ability to dream? What could explain this bizarre phenomenon?
I for one will not be fooled by these potential tricksters and saboteurs wreaking havoc with our dreams, whoever they may be. In honoring the great Martin Luther King on Monday, one can’t help but conjure up the vision of his inspiring I had a Dream Speech. Look no further than to this historic speech to comprehend fully the power we have if we summon the courage to dream.
Your vision and dreams of the future power and often turbo-charge your financial plan. Financial benchmarks like cash flow, net-worth, return on investment, asset allocation, etc are all necessary for measuring your plans progress, no doubt. But these are numbers on a spreadsheet that unaligned with your vision and dreams are meaningless.
Now back to the pro-dream campaign….. First, if it’s been way too long since you allowed yourself the joy of dreaming, there’s no time like tomorrow to start again.
Dreaming makes you vulnerable. All it takes is a couple times of having your dreams shattered and that’s it, you promise yourself you’ll never put yourself in a position where you could get hurt like that again.
You may have grown up in a family where dreaming about a better life was not encouraged. You may have seen your parents and siblings accept life the way it was and well, that’s the way it is, life isn’t fair, etc,.
You may be someone that rarely uses your imagination and are 'just the facts' type of person. Learning to dream, learning to visualize is a brand new skill set for you. For you, learning how to dream is like learning a foreign language. (check out Shakti Gawains classic book: Creative Visualization)
And you may be like many of the clients I meet that had big, colorful dreams of the future, everything was on track, life was wonderful and out of the blue, the love of your life passes away.
If you’re too scared to dream, dream anyway!
As a holistic financial planner, having clients able to clearly articulate their vision of the future is a must have. When I ask clients how they visualize their lives in their 60's, 70's and 80's, the answers of golf, golf and more golf doesn’t cut it. For some, one of the reasons I just mentioned may be what’s holding them back. But in order to have a successful outcome when creating a financial plan, being able to dream and clearly visualize the future you imagine is crucial to that process.
The good news is, with a little patience, a pinch of TLC and encouragement, clients eventually breakthrough the fear of letting themselves dream and what happens next is as beautiful a moment as you can imagine.
Dreams that have long been dormant come back to life. Ideas that have long been tossed aside take on a new life of their own. The future suddenly looks less daunting, in fact, the future looks very promising indeed. That wonderful sense of feeling alive again cascades through your body.
You are back. Welcome home. Now get back up there in the Director’s chair where you belong, start directing this movie called ‘your life’ and always, always dare to dream big.
Photo credit Pat Chiappa
John Bogle, the founder of Vanguard, recently conducted an extensive interview with a financial insider publication called Money Management Executive. In this no holds barred interview, Bogle shares his opinions and wisdom on index funds, ETF’s and alternative investments and how they are being used and marketed to the public.
When asked about the proliferation of index funds, with new ones popping up almost daily, Bogle in his usual no nonsense manner had this to say: “ I think it’s gone much too far. Most of them are not worth the powder to blow them to hell. I think there are 1,500 ETF’s in the U.S. It doesn’t work in the long-run. I can’t think of a worse way to invest. All that leverage doesn’t work over the long term."
“It’s 1,450 out of 1,500 ETF funds that I just wouldn’t touch because they’re not diversified enough. Or they have some huge speculative twist to them that if you can guess the markets right you will do very well for a day or two but who can do that? Nobody."
As a self-described ‘Boglehead’ and a long time believer in the value of low cost, well diversified index funds and the high integrity approach Vanguard offers, any opportunity to listen to or read Bogle ‘unplugged’ is just too good to pass up.
As the amount of investment choices continue to multiply daily and it becomes more difficult to separate hype from reality, refer back to this common sense article as often as is needed, tune out the noise, keep your investment costs low, create a well diversified portfolio, develop your financial plan and stick to it.
Vanguard’s Bogle: Indexing Has Gone Too Far
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/