Metrics

I still can hear my professor’s voice from grad school echoing through my head repeatedly… “What gets measured gets done.” I am not going to say that this mantra is full proof nor will I say that things that are not measured do not get done, but it is amazing how if you are willing to go through the process of measuring things… to keep track of them, that they often seem more likely to get done.

In work, that is why it is important to not only have things that are measured but to think about the implications of what may be ignored due to the items that are chosen to be measured… Often in the workplace, whether a small business or a large corporation, this has led to the arrangement of a balanced scorecard where different things are measured to hopefully alleviate not having one important thing sacrificed for the sake of another.

In financial planning as it exists today, there often are tendencies to try to focus on one thing in terms of looking at priorities. Though there is definite power in focus, especially if one is willing to sacrifice other areas of one’s life to achieve something, this may not always be practical or advisable. Often it is not.

In goal setting, many may have made New Year’s resolutions as it related to health and wealth. These may include a goal to lose so much weight by such and such point, or to be able to complete a certain activity by a certain point of time, or to have accumulated X number of dollars.

I have completed a number of marathons. It involves a lot of training and a lot of time. I had to sacrifice other things in my life to be able to do these things. Though I reaped a number of benefits, including feeling better physically and in the training for one of them, losing a fair amount of weight, I also had less time that I spent on my relationships and some of them may have suffered accordingly.

Part of the beauty of planning is in trying to find the balance of what should be measured. What should be priority? What should we make certain is kept in the picture so it does not suffer? How often will we check in to make sure that we are going in the right direction? Are we prepared to readjust if our goals have unintentional side effects?

What measured does get done… and it can be used for significant benefit. It is also important to remember that there is more than just one thing that most of us face.

As always, please send your questions and comments to info@objectiveplanningllc.com

 

 

 

 

Gratitude

I hope everyone is having a fantastic 2013 so far. I know I have been introduced to a number of new people who have decided to bring me on as a planner or a CFO to them and for that I am grateful. Perhaps even more importantly as far as I am concerned are those people who have decided to stick with me. They ultimately are the ones that allow me to focus on doing what I really love, which is working with people in examining how they spend their resources in order to help them achieve their goals.

This brings me to a very important point. Gratitude. I will suggest that one of the hallmarks of being able to build wealth is being grateful for what you have. Forget the psychological impact that you may have if you are never thankful to others for what they have done or given to you and their possible willingness to give you more. Let us think in terms of practicality. If you know that you want a specific something, let us say financial freedom, but you sabotage it because you always have to have a nicer car or a nicer home or a nicer vacation, your chances of achieving the financial freedom you “desire” are greatly diminished.

It is amazing how people who are grateful for what they have may be more content and better able to put aside the fruits of their hard work and ambition to get them where they want to go. I have noticed that people who are grateful tend to be able to stretch a dollar a lot further than those who lack gratitude. Please note that being grateful is not the same as being apathetic and lazy. Chances are that you will still have to work… and work hard to achieve your dreams and goals, but if you work on cultivating your gratitude, chances are your journey will be more pleasant.

What are you grateful for today?

As always, please send you questions and comments to info@objectiveplanningllc.com.

 

Holiday Savings

Recently in Nashville, the air has turned brisk at night and is definitely beginning to cool off during the day. In my mind it is nature’s way of saying it is time to stock up for winter. For many this may mean it is time to set aside money for holiday spending as well.

If you have not done so already, this would be a very good time to try to plan out what you are going to purchase as far as gifts are concerned related to the holidays and perhaps plan what you are going to do/where are you going to go if you plan on going anywhere. The reason is that often with proper planning you can avoid some of the needless emotional spending that can beleaguer last minute shoppers by trying to impress with an expensive gift when it is possible that they could have gotten more bang for their buck by using some forethought.

Depending on where you look for your statistics, the average American household plans on spending around $700 on food, gifts and decorations for the holidays. This does not include any travel expenses that may be associated with visiting family, etc. Please note that if $700 represents the average household, then a good percentage will spend substantially more on these items. This is also assuming that people are not deciding to pay for these purchases with credit that they do not intend to pay off immediately. In the case of credit purchases, the interest can rack up and easily add a substantial amount over time.

Here are some tips then to be thinking about to have pleasant holidays and not worry about the bills that may be coming in January.

  1. Plan out a list of people for whom you plan to purchase gifts. Set yourself a budget. Is there something that you can give them that would be small and meaningful that they would honestly appreciate and enjoy? How do you think they would feel if you wrote them a sincere note or if you fixed them something special yourself whether homemade cookies or something else? As a personal suggestion, if you are considering giving gift cards because they are so much easier to give than taking the time to find out what someone would truly appreciate, consider giving cash instead. It offers greater flexibility and rarely goes to waste.
  2. Plan on setting aside a portion of your paycheck for holiday gifts. By planning ahead and setting a portion aside, chances are greater that there will not be the need to have to rely upon credit cards to pay for purchases. I will suggest that not having to stare down credit card bills in January makes any holiday season brighter.
  3. Consider moonlighting if the budget is tight and you feel the need to give various gifts. It can be a way to provide enough money to pay for the holidays. Please note that if your budget is stretched so thin on a regular basis that you feel the need to moonlight for your holiday expenses, you may want to revisit your regular budget and try to determine if there is something that should be cut.
  4. Try to plan your purchases ahead of the last minute holiday rush. Chances are that you will have a greater chance to make the purchases that you want rather than having to deal with the mad holiday dash. Though I suppose there may be some out there who like the idea of waiting in lines of scrambling with others to be one of the few to get item X. If such is the case, feel free to disregard this last suggestion.

By planning out your holiday expenses beforehand and putting aside money for these expenses, there is a good chance you will make your holidays brighter and quite possibly save several hundreds of dollars in either well thought out purchases or avoided interest payments. Should this article inspire you to save a considerable amount of money, please consider this my early holiday present to you.

As always please send your questions and comments to info@objectiveplanningllc.com

Moonlighting

Sometimes it is difficult to cut expenses any more. You are fairly close to bare bones and to cut expenses may do more harm than good. Or perhaps there are some expenses that are not bare bones that you simply are not willing to give up. You may be looking for wiggle room in the budget or perhaps you are looking for something that will get you ahead. For a number of people this could entail moonlighting.

While I am not an advocate of putting your main source of income at risk, and some employers do forbid outside employment. If you do have some opportunity it could very easily be something to look into under this caveat: it is not a good idea to depend on your moonlighting in order to meet your regular budget. If you have to moonlight to pay for regular expenses, most likely you need to think of either a) cutting expenses or b) look for finding better paying employment or c) some combination of the previous two.

Now, that caveat given, there are a number of potential things to be said in favor of moonlighting. If you are in debt, it can serve as a means to accelerate debt repayment which should free up your overall budget. It can also serve as a vehicle to promote savings and investments which will generate income. Also, if there is some special onetime purchase for which you would like to save such as an engagement ring (hopefully just one time… though statistics may suggest otherwise), moonlighting can serve well. Over time the extra money that you may gain whether it is $500 or more per month of income can truly add up, and you may find yourself with less debt, more investment income, or that treasured item far more quickly than you would have been able to obtain with regular savings.

There are a few reasons beyond money why one might want to consider moonlighting. It can provide some greater ability to handle job loss should arise. Also, it may serve to help broaden your skill sets and contacts which may help you in looking for your next line of work.

When it comes to budgeting, both income and expenses are important. Moonlighting may serve as a way to give your income an edge. Once again, just be certain not to increase your regular expenses to match your new income. That mistake could be something you would doubly regret.

 

Please send your thoughts and comments to info@objectiveplanningllc.com

Delayed Gratification

It is important to note that as one works towards goals, one should keep in mind the importance of delayed gratification. In the process of saving, one may feel tempted to get something that one wants, whether it is a particular item such as a car or a large screen television, or an experience such as a long awaited vacation, etc.

We all have items and experience that we would like to have and when one has enough money to acquire said items or experiences there is a temptation to take it. Some things personally that I would like to experience include a trip to Antarctica, an Alaskan cruise and para-sailing  Some items that I would like to have include once again having a harp (at present my eyes are on the Silhouette Electric, the Style 100 Concert Grand, or the Style 2000 Concert Grand by Lyon & Healy) and a home of my own design. There are items and experiences that I can afford on this list and some that would absolutely make no sense for me to purchase at this point.

Oftentimes when we decide to purchase something, we do not tend to realize the opportunity costs associated with something. Many will say X will only cost Y and we either have the money or we do not. One of the problems that we face is that we do not often realize the opportunity costs associated with our purchase or what I will refer to as the ongoing/collateral costs.

I have had several people tell me that when they buy season tickets to a sporting event the problem is that it is not just the season tickets that they have paid for, but every time that they decide to go to the game, the food and drinks that they will have before, during, or afterward not to mention the jackets or jerseys that many a fan will end up purchasing as well. Are these expenses necessary? No. But in their defense, if I were to purchase a harp, I would most likely also want a case, an amp, several sound effect pedals, lessons, etc.  Or if I were to have my dream home that I built, there is a good chance that I would succumb to the temptation of purchasing all of the various things that I would want in it to make it “perfect”. It is amazing when we make a purchase how it sometimes can open up a Pandora’s Box of expenses which we did not initially anticipate.

All of this money meanwhile could have potentially been placed in an area that would have grown and helped us better be able to afford our desires. The importance is to be able to refrain… especially with items that will be ongoing expenses. After all it is not the initial $200 that may be such a big deal; it is the $50-200 each month that can truly add up.

The moral of the story is this: if you can delay a purchase that would not be adding productive value to your life, please consider doing so. Chances are your checking account and wallet will thank you for your discretion.

As always, please send your questions and comments to info@objectiveplanningllc.com

Why the House?

Occasionally I talk with different financial advisors and we often hear about different couples who think about divorce. More often than not, the lower income earner of the couple requests to have the house. The question that goes through my mind is why? Some people seem to think they have not “won the divorce” or are not secure unless they get the house. To many the house is the prize, a trophy of sorts that says I am the one in the right and the other person is gone. Though I realize emotions may lead one to feel that way, the financial reality will often suggest that nothing could be further from the truth. The house is more than likely an albatross around the lower income earner’s neck.

The house after the divorce is too large for the individual once the couple has split. It requires more costs in terms of upkeep, etc. than they would have most likely had if they had looked for a place on their own. The house is not liquid. Last time I checked people’s homes are not made of gingerbread nor other edible material. In short financially, the house is more likely a gold-plated ball and chain rather than an asset that allows the person to move on with their lives after what may be a painful emotional experience.

Some of you may be detecting my belief that the personal residence is probably one of the last things one should desire in terms of assets should one try to divvy up assets for a divorce. Personal property probably goes lower than the house on my list. If one is out to “win” in the divorce game, go for the assets that are more liquid and have income producing value first.  The other person is stuck with assets that very well may cost more to maintain and does not give them nearly the flexibility to move on with their life. Offhand, that does not sound like a good scenario to me.

As always, please send your questions and comments to info@objectiveplanningllc.com.

Car Payment

For many people it is an exciting day. Perhaps not as exciting as paying off one’s mortgage, but an exciting day nonetheless. It is the day that one has made the final payment on one’s car. Yes, the day that a depreciating asset is finally paid off is an exciting day that translates to usually hundreds of dollars saved each month or thousands of dollars each year.

As it relates to budgeting and thinking about your budget, I would suggest that you continue to make that car payment. Except this time I would like to encourage you to pay it to yourself. If possible, resist the temptation to buy another car as long as it is feasible. And by that, I mean to say if your car is running relatively decently and does not require several thousand dollars of repair on an annual basis, I would keep it. Maintain it as your owner’s manual recommends. A new car, or a new to you car can be very tempting, but is it helping you achieve your life’s goals? Even if one of your goals is to have a particular type of car, would it not make more sense to delay your gratification and save up some money so that hopefully you will be able to pay for your car in cash rather than paying interest on it?

Some people may have high interest debts to the side once your car payment is paid off. I would advise considering using that money that you were paying for your car payment to accelerate debt repayment. Once the high interest debt is paid off, it would then be time to set aside money for your future car. Even if you were only able to save for two or three years before you needed to trade in or purchase another car, if you follow this method on a consistent basis, you should find that you will be in a better position in your following car purchase.

As always, please send your comments and questions to info@objectiveplanningllc.com

Hot Stock Tip…

Occasionally those who do not know what I do when I mention that I am in financial services ask me,”So, what is the hot stock tip?” This typically leads me to explain to them that I do not deal in hot stock tips. I do not even sell any product. I try to help people make sense of their financial situation by putting together a plan that addresses their goals and desires.

Often this is a fairly intensive process of getting to know the client, their goals and dreams, and then going through the grunt work of trying to assist them making it a reality by looking at their budget and spending habits and trying to put the proper pieces in place as indicated by a custom-tailored plan.

One thing that I have tended to notice regarding the “hot stock tips” that I have received is that they tend to be fairly risky, and quite probably a good way to lose money for the person who has received it. Rarely have I heard from get rich quick scenarios the caveat… “lose money quicker…” It simply does not tend to sound as good from a sales perspective, I guess.

Budgeting is not sexy to most people. However, it can assist people with being able to put aside money to help them achieve their long term hopes and dreams. But for those of you that are still itching for a hot stock tip, here it is… Be careful with “hot stock tips”… the reason why they are so hot, is that you just might get burned.

 

As always, please send your comments and questions to info@objectiveplanningllc.com

Legacy

Some may think I am about to speak out of the other side of my mouth as it relates to financial planning. How it is important to start off with goal setting, refine these goals, budget accordingly, and then use whatever forms of planning you can to help you achieve these goals. Perhaps, that may not be the right place to start. Perhaps the best place to start is with legacy.

Legacy is how you are remembered by others. I loved my grandmother. I knew her growing up and remembered when she passed away while I was in college. When I came back for her funeral, I also remember that during her eulogy that the person talked about her volunteering for this charitable group, the twenty years she played the piano for the church, etc. However, as I went around I overheard a number of conversations that truly captured her legacy. “Who was she again? You know, Mary Sue… she was the one with all of the good recipes.” Or “I am going to miss her flower arrangements so much…” Not one person aside from the eulogist talked about the charities or the twenty years of playing the piano for the church. Most people talked about her cooking or her flower arranging. That was her legacy. My grandmother was a great cook who freely gave out recipes and loved to make dried flower arrangements. I will suggest there are far worse legacies one can have.

There are some important lessons to be learned about legacy from this example. It is other people who in the end decide our legacy. We may do some very worthwhile actions in our lifetime, but they often may pale in comparison to who we are at our core. Though I know my grandmother played the piano, in the end, I too have to admit that I could see how most people would remember her for her cooking and her dried flower arrangements. I would personally like to add that she was a doting grandmother to me.

There are others who may commit a tragic or several tragic mistakes which will haunt them beyond their graves. I will not mention names specifically in this case. They are mentioned often enough in the news for one to readily come up with a list. The lesson is that though it can take a long time to build up a positive legacy, like reputation it does not take long to develop a negative one.

The good news is that even though we can only influence our legacy, we can take actions to change how we are remembered assuming we find it important. The story goes that Alfred Nobel had a life-changing moment when he read his obituary. From someone who was perhaps best known for his propagation of destruction, he went on to be known as the person who honored those who bettered humanity with his institute for Nobel Prizes. Perhaps this would be a good time to stop and think how you would like to be remembered.

Some may wonder why this relates to financial planning.  If one truly cares about how one is remembered, this would suggest that one may need to take different actions and/or set aside resources whether time or money to help shape one’s legacy. This could be life-changing for some as it was for Alfred Nobel when he read “his own” obituary published by a French newspaper.

As always, please send your thoughts, comments and questions to info@objectiveplanningllc.com

Cyanide Capsule

I remember when I was young, on television or in the movies there would be the scenario of the secret agent who when caught would take a cyanide capsule to die quickly, thus preventing all opportunity for information to be extracted from the opposing party.

There are many times that I wonder if many people do not have their own cyanide capsule hidden somewhere as it relates to retirement. It sometimes seems as if they plan to live their life however they choose in the manner that they choose as long as they can get away with it, despite the reality that financial matters will catch up with them. Okay, quick hypothetical financial planning exercise. You have a couple who is used to living off of $60,000/year. They will receive $30,000 in benefits from social security and other sources.  They also have $100,000 saved. Not counting the effects of inflation, how long do you think they can live their current lifestyle?

The sad truth is that most fifth graders probably have a stronger grasp of financial planning reality than people who are entering retirement. Most fifth graders would say 3-5 years. I would agree. And yet, I run across couple after couple who though they might be in an extremely similar situation, that they somehow have enough saved combined with other resources to last them the rest of their lives. I guess the operative phrase is “the rest of their lives”. Perhaps they have a cyanide capsule hidden somewhere. Given that the average life expectancy from birth is around 76.2 for men and 81.1 for females, and that the average retirement age is before age 66, there seems to be a disconnect between people’s expectations on how long they can live the lifestyle to which they have grown accustomed and the reality. Perhaps the baby boomers have some secret society and are passing out cyanide capsules to each other saying, “Just remember, if you run out of money… just bite down on this… that way you do not have to worry about anything…” If such is not the case, may I recommend sitting down with an unbiased source and figure out how to come up with a sustainable plan that does not require a cyanide capsule.

As always, please send your thoughts and comments to info@objectiveplanningllc.com or even better, why not call or write to schedule an appointment.