May 23, 2013 § Leave a Comment
Retirement is something that you are really looking forward to. But it will not be fun if all you do is feel lonely, have no purpose in life and run out of money. SO, let’s talk about making your retirement terrific.
What are your dreams – For thirty, or more, years you have been dreaming of retirement. Not that you don’t like your job or the people with whom you work. But making your own schedule has been a goal and now it’s almost a reality.
Most people, in my experience, haven’t really thought through the details of exactly what they want to do for the thirty or so years you may live actually IN retirement. And that can make the early going less dreamy than you’d hoped.
So what are your dreams, my friend? What are you hoping to do in these years? If you are a person who enjoys completing a task, but in retirement you have no tasks, what will that mean for you?
It can’t all be napping- Being well-rested in retirement is part of a person’s usual retirement dream. Not having to wake up at a particular time and HAVE to be somewhere. But are you going to be happy spending every day with no purpose? Think about when you’ve been on vacation, sitting around all day, every day, and how just doing nothing kind of makes you more and more sleepy. After a few months of that, then what? Emotionally, sleeping all the time probably won’t result in joy.
Where do you belong – What about friends with whom to enjoy lunch out or a beer? If most of your friends are from your now former workplace, where do you now belong? The friends at work can’t always take a day off to hang out with you. They have responsibilities and time commitments. They may see you once and in a while. But soon life at work and with that circle of pals will go on, without you.
Purpose and passion- What I am leading up to is this. I recently read this sentence, ’When you work at something you love, everything else flow from it. Your social life, your friends.’ Finding your passion not only gives life purpose and makes time fly that thread of passion fills life to overflowing with joy. Friendships will naturally develop as you become acquainted with others of like-mind who can’t wait to share in your pursuit. They will share they enthusiasm with you and you with them. The phone will ring, there will be laughter and fun and you will be living life fully.
What’s the bottom line? Give your life in retirement thought. Not simply about the money, though that is a foundational element. Consider your whole life. Prepare for it like you did for the birth of your children, or your favorite vacation.
And whether you choose to get a part-time job for some extra cash or to pursue a dream work at what you enjoy. Consider going back to school to get new skills or certifications to give this passion your all. After all, you have YEARS left in life yet to be lived! Follow your passion and retirement will be just even better than you dreamed. (CR9214)
May 16, 2013 § Leave a Comment
Life is going differently that you’d dreamed and now you are parenting alone. Deep breath. You’ve got this, bud.
You are able – You CAN do this. You have to do this, so you obviously will. You’ll get the knowledge you need. You already have the wisdom you need. And you have the courage to make this life beautiful. We believe in you, buddy.
Make a budget that works- You have to look at all the bills. Hiding from them does not help, as you tell the kids when they try to avoid whatever discourages them. So, open everything and track what you’ve spent the last few weeks on everything. This is the beginning of making your own budget and budgets are good. They are a guide for what has been spent, ty provide a tool to plan for what will be spent and they present money in an objective format.
To get an idea of what financial experts suggest on spending percentages search online through your local library. Once you have an idea of how you might allocate your finite resources,make a PLAN. Paying bills automatically may be a good option for you so that you have one less thing to do. But feel FREE to do whatever works for you.
You aren’t alone- If managing the money hasn’t been your previous role in the past, or you feel totally out of your element, talk with your local financial institution, your church or friends who can sit down with you and work out a plan. You are not alone. You may be the only adult at breakfast, but you are not alone in this world, toots, and don’t forget it. You may not want folks to see you feeling confused. BUT there are people who would LOVE to help you, as you have helped others with their hardships and transitions. It is only if you isolate yourself that you will be alone, buddy.
Say no about spending- Do not feel guilty when the kids can’t have things they want to have. They will ask because they don’t know and because they are immature. But life isn’t about giving them everything they ask for, nor is it about parental guilt. This present single life is way more than about stuff and money. And you need to NOT let unproductive emotions rule your heart and mind. The kids will be fine. They will always want more stuff. Even if you had lots more money they would continue to be unsatisfied because it is the job of retailers and product manufactures to help them desire the newest thing. So be strong and calm and clear in your financial direction. The more they can be included in the process by giving them the reins of their money or, as they mature, getting them to help paying bills with you so they see exactly how life works and develop a clear understanding of the ‘family finances,’ the less they will grumble. And, yes, they can learn this. It will give them a better handle on money than you had.
Keep on keeping on- Now, keep going. Keep improving. Keep checking your plan and adjusting it as needed. Life is going to awesome. This is going to work out. You will come out on the other side of this transition wiser and more awesome. And you will have raised some wonderful people.
May 9, 2013 § Leave a Comment
So you or your baby has completed college! Congratulations to you both. But now what? Where is the smart money path? Here are a few tips
Take good care of yourself, please. You just spent approximately four years working like crazy to advance your options and vocation in life. That was an investment in yourself that you, and perhaps others, made in you. Continue to have that ‘investing in yourself’ vision for your life so that how you spend your money and time adds to that foundational investment and helps you be your best you.
1.) Live on less than you earn – If instead of thinking you have finally MADE IT, you will continue to think in terms of being a starving student on a tight budget, life will go very well for you! Many of us made a big mistake, beginning with our first job, and developed an entitlement attitude with immature spending habits. That lifestyle gradually created a financial life that was scary and a bit out of control as we spent far in excess of what we earned. Learn from us, little grasshopper, and be wise.
2.) Be organized – If you were the student who procrastinated and couldn’t find your books or your assignments, managing your money could also be disorganized. Unless you make payments and savings automated. Getting organized with your finances now becomes one of your most important jobs. Whether you use a notebook, or your smart phone and apps, to keep track of your money, make a budget and have a plan for what the heck your money will be doing now that you have a grown-up job. First jobs don’t always pay the moon so you won’t have the kind of loose cash that can stand much waste and frittering. Unless you get organized, you will quickly find yourself getting behind and feeling overwhelmed, my friend.
3.) Loans are due – as part of your frugal living remember that 6 months after graduation student loans begin to be due. You may have an option that allows a reduced payment based on income and that may be a better fit with your brand-spanking-new budget. You may want to consolidate loans. I am an investment advisor and not a debt counselor, so this is not my area of expertise. If you will speak to the entity holding your loans you can get more information on your options. But I do know that making your loan payments is critical to a good credit score.
4.) Please save- Keep investing in yourself and begin saving for your retirement and emergencies. I KNOW it feels like you don’t have ANY money. But try to do everything you can, including continuing to have roommates if necessary, to keep living costs down so you have a bit put aside. Your self-discipline will pay off!
Being disciplined may sound boring. You may feel like this is no way to have the glorious life and the future that you dreamed would now be yours. But all this discipline creates a happy and light heart and few money worries. We only want you to be happy, you clever graduate. You did an awesome job, bub. We are proud of you! Good job. (CR9232)
A free publication entitled, Investing in Yourself, from the Federal Reserve Bank of St. Louis, about the financial benefits of getting an education, is available through this link:
May 2, 2013 § Leave a Comment
A financial plan covers your entire financial picture: your assets and liabilities, your risk management, your financial goals and whether or not they are realistic. Financial advisors offer plans and because they are so extensive, there is a cost to have one developed for you. Last week I explained net-worth, debt-to-income ratio, cashflow and budget. This week we wrap up the financial plan components.
Risk analysis – Depending on the results of your net-worth statement and your budget and the existing and various insurances you have, you are now able to determine if where you or your loved ones are lacking. Managing risk is what life insurance, professional liability insurance and personal property insurance is about. If there is a gap in what you have compared to what you need you may want to fix that gap or face self-insurance. Self-insurance is when you use your cash to cover the loss entirely. If the cost of insurance is cheaper, I vote for additional insurance.
Debt repayment – When will your debts be paid off? Do you want to press forward with a more aggressive repayment plan? Where will you start and how much will you allocate to that priority? This is a personal preference. Just don’t short-change your savings.
Savings plan – speaking of savings, please remember that the same compound interest that occurs with your debt and interest rate, occurs with any savings. Money saved and earning compound interest adds up more quickly as each period’s principle and interest earns even more additional interest. That works like a lovely compost pile, cooking and growing as year after year passes. Compound interest is a very good thing.
For more information check the internet or your local library for details on creating a financial plan or contact a financial advisor. (CR9155)
April 25, 2013 § Leave a Comment
A financial plan covers your entire financial picture: your assets and liabilities, your risk management, your financial goals and whether or not they are realistic. Financial advisors offer plans and because they are so extensive, there is a cost to have one developed for you. Here are some of the parts that comprise a good financial plan. Too much info for one blog post, we’ll finish with more information in Part 2 next week.
Net-worth- a net-worth statement shows the difference between your assets and liabilities. Listing your assets means compiling the estimated – but accurate- value of house, camp, cars, business. And then adding in your ‘liquid assets’ CD’s, investment accounts whether retirement or individual/joint accounts held , savings and jewelry, coins and other hard assets.
From that total amount subtract your total liabilities: loans on real estate and other property, all consumer debt such as credit cards, student loans
The NET result, hopefully positive, is your net-worth.
Debt-to-Income ratio- This is a simple calculation. Add up all your monthly debt payments: mortgage, consumer debt, child support, everything you need to pay each month. THEN add up your monthly income. Divide your income by your debt. Here’s an example: You pay $500 a month and you earn $2000 per month your debt to income ratio is 25%
Cashflow/Budget – Cash comes in and then it is allocated for various purposes: housing, debt repayment, savings, life. Tracking the saving and spending of money is a cashflow statement or a budget. You need one to create a financial plan. You need one if you ever hope to have a positive net-worth.
Next week we will talk about the other aspects of a good plan. (CR 9154)
April 18, 2013 § Leave a Comment
There are philosophies, and from them there are strategies, that people use in investing. Each of them have pros and cons and since there is no certain method to make money all the time, as investing involves risk, you and your advisor may use several of these strategies or may even have your won less well-known method. Any strategy needs to be a good choice for you, for your risk tolerance and your goals and objectives.
Market timing – can be anything from day trading, trading on today’s news or news over a short time horizon to trend trading seeking to move with economic conditions. Market timing seeks to predict the future direction of a single stock, the market or the trends in economic conditions world-wide or domestically.
Asset allocation- is a method of spreading investments over different ‘classes’ of investments, such as bonds, stocks and cash. As with all investing any asset allocation should be done based on your risk. The mix may depend on your time in life, your need for income or safety, etc.
Buy and hold – this strategy can be used with asset allocation or any of the other strategies. It is a passive investment strategy, meaning it is hands-off. You make a purchase and you hold it for a long time.
Dollar-cost averaging – this is a strategy in which you buy systematically or without real concern for the lows and highs of an investments price. Sometimes the cost may be higher, and at other times in economic dips, the price may be a bargain. But it is the regular contribution that helps balance the cost out in the end. This is one of the strategies used if you invest regularly in your work’s retirement plan.
Value investing- is another investing strategy in which you look for underperforming sectors or stocks that you believe, because of various equations or ratios, may eventually produce a good return. This strategy seeks to find a bargain others may not see to capture short-term or long-term eventual rise from the bargain price paid for the stock to the hopefully higher sale price some time later.
These are some of the strategies used by professional investors and advisors. You may use one, or several of them, in managing your investments. (CR9153)
April 11, 2013 § Leave a Comment
Overspending is one of life’s biggest temptations. Flip side of that temptation is compulsive saving. Whether you are saving out of fear or spending to fill needs that you haven’t identified, understanding your own self, figuring out what is going on in your mind and heart and addressing your real needs in smarter ways was the impetus behind my first book. I am on the lookout for other authors who address similar perspectives. And in an insightful book by author and friend Sarah Morehead, individual’s needs, be they unmet or met unwisely with crazy spending, are detailed and better options explained.
Here are some of Ms. Morehead’s points about our spending.
Why are you spending? – We spend because we are each, individually, motivated by different needs. Morehead uses common sense to help make this point more clear. She points out that siblings raised in the same household, who may hold very similar values about money, will still spend differently because of their unique motivators. If you are motivated by control, you might save every bit of money you have so that you can in some way, prevent bad things from happening to you.
She goes on with examples: Is being with friends and relationships so important, you will buy a round of drinks on a credit card so you can show your affection? Is status so important you must live in a certain area or drive a particular car to show you are special?
What is a need? – Morehead uses her study of psychology to break this money mystery apart for us. She explains that a car is not a need. TRANSPORTATION is the need. A car is your strategy to fill the need. It may also be a liability, from a purely financial perspective, as it may be money you now owe to the bank. This doesn’t make it bad. It simply is factually understanding your life and your money and pulling the emotions apart from the money.
A yoga or exercise class may fulfill your need to be healthy and to have relationships. Needs cannot be ignored. Left unmet you will find a way to meet them even if you sabotage your budget to do it. She urges then that you really understand your needs and work through them- and she helps you to do that in the book- with better, cheaper, smarter strategies, so you can fulfill those real needs.
A better strategy?- Using the above example of a need to exercise Morehead suggests that your need for health may be achieved less expensively by walking or buying used equipment to work out at home, etc.
In this case the other need for relationships would then be unmet. What ideas that don’t cost much money might be substituted to meet you need for friends? What about a volunteer organization, attending church, helping at your kids’ school, working with animals? What about being the house to party and inviting folks over for a potluck game night?
Face it: the needs you have are real. Knowing that allows you to address them with logic and reason. You don’t have to spend money and wreck your budget to be cozy, friend. (CR 9152)
Link to book through Amazon: http://www.amazon.com/HATE-Money-Understanding-Personality-ebook/dp/B004YX9UA0