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?

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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.

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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.


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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.

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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.

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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.


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Independence Day

Some 236 years ago, the “founding fathers” decided that enough was enough and they decided to declare independence. It could be argued if they did that for less of a reason than we have today to declare “independence” from our governing body. That is not the reason I am writing this article. Rather it is in recognition that independence, if truly declared comes at a cost. For those who declared independence 236 years ago, it demanded blood, sweat, and tears.

For those who wish to declare financial independence, it will demand savings and reigning in control over one’s desires. This often is associated with budgeting. Many people ask me why is that I focus on budgeting with my clients rather than worrying as much about investments and their respective allocations. This is not to say that I do not worry about the allocations. I just always believe you should focus on the areas where you get the most impact. Time and time again when it relates to finances this comes down to budgeting/cash flow. It comes to budgeting in the front end in being able to save enough to possibly declare independence financially and it comes down to budgeting in the back end once one has declared financial independence in order to maintain it. All too often it is the budgeting in retirement which can be even more important than the budgeting during the accumulation period. The reason for this is that often when one is retired, there may not be an option to try to increase income otherwise. Budgeting of expenses at times like this becomes of paramount importance. After all, making certain that your investments are sufficient to last twenty to thirty years including the effects of inflation is one that requires discipline and careful attention paid to one’s expenses.

The good news is that if one is attentive to one’s budget and allocates one’s savings appropriately, one does have a very good chance in being able to declare financial independence without having to worry too much about having to go back under someone else’s financial rule.

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Wiggle Room

Realistically one of the most important things that I can do to help my clients is help them find wiggle room in the resources that they possess to help them reach their goals. Sometimes it is realizing that there is no traditional wiggle room in the budget. Perhaps it may be that they may need to do some moonlighting or decide to sublet a room. Often times by taking advantage of wiggle room, one can begin to leverage the situation. Surprisingly, many times when it appears that there is the least traditional amount of room in the budget due to debt, etc. is when the greatest gains can be made by finding additional wiggle room.    Let’s say that someone is able to find an additional $500/month by subletting a room or finding some additional work. It could be through this additional money, that they can pay off some debt and become eligible to refinance their home, when they were not able to refinance their home before. This lowering of interest rates reduces their payments each month by hundreds of dollars each month, which then can be further used to reduced debt.

It is funny, how within a year or so, there can be several instances where that $500/month could begin to translate into a significantly larger amount of difference in one’s life. If one continues along the course, the dividends can become even larger. Once debts are paid off, one may be able to focus on building assets that add more income and increase one’s wealth. Usually by the time the debts are paid off, one has significant resources to put towards building even more resources. All of this began with finding a little wiggle room and the discipline to stick with the plan. The initial actions needed to find this wiggle room may not be pleasant. In fact in America, privacy has come to be valued at a premium. One question that comes to mind: “Is our value for privacy preventing us from getting the things that we truly desire? It may be something that we need to examine.” Food for thought.

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Advice to College Graduates

It is easier to get used to living with more than it is to get used to living on less.

Let us assume for the sake of argument, that while you were living in college, you were able to meet your living expenses on $24,000 or less per year. For this amount of money, you probably were able to live together with some other people, pay for food and utilities, clothes as they arose and be able to do a little bit of travel to visit the family. Let us also assume that you are lucky enough to be offered a job and have a salary of $50,000 to start.  Let us also assume that you have $3,000 in credit card debt.

You may possibly find that $50,000 that you thought was coming to you quickly turns into $40,000 due to various items withheld in your paycheck whether it is insurance or taxes.

My advice is this. Live as if you still only had $24,000 or less to live on and save the rest. If you are eligible for a match in a retirement plan at work, take it. If you have any credit card debt, this would most likely be a good time to pay it off.  If you are eligible for saving in a Roth IRA, there is a good chance that it would make sense to investigate how Roth IRAs work and consider investing the maximum contribution.  Consider placing some of the rest of the money to build up an emergency fund. Ideally this fund should be built up to 3-6 months’ worth of your expenses or in the case of living on $24,000 per year this would be $6,000-12,000.

Fast forward one year. By this time you may have: 1) paid off your credit card debt, 2) built up an emergency fund of at least $6,000, 3) saved $5,000 into a Roth IRA, 4) may have $3,000 or more dollars built into your retirement plan if your employer offers an average 3% match.

If you were to keep this savings up for four years, there is a strong chance that you will have set yourself up for a favorable financial future for a number of reasons:

1)      You will have resisted the temptation to spend what you make or more than you make. This will carry you far in life.

2)      You should have a solid cash reserve built up that not only could be useful for times of financial hardship, but could be used for a major purchase.

3)      You would have $20,000 that you would have saved into a Roth IRA, in one more years’ time (after your 5th year), you will have the opportunity to take up to $10,000 of the growth in that account and put it towards a first time home purchase.

4)      You will have time on your side when it comes to investing for your retirement, because you were diligent in investing early.

Please write regarding any questions you may have.

*Please note that everyone’s situation is different, and that you should consult a financial advisor individually before following any investment recommendations.

Live Your Own Life

People are often surprised at the amount of time that I spend trying to find out about what it is they that want, their likes and dislikes. I hate to say this. I am also a little surprised that I feel I have to say it. There are many people that are living someone else’s life. They are devoting their resources: time, energy, and possessions to items that are not truly important to them. Instead of focusing on what they may list as truly important,  they instead spend time keeping up with the Jones’s… buying a certain type of house, a certain type of car, etc. not because they truly want that, but in order to keep up appearances.

Are our lives truly so dictated by others? Do we find ourselves succumbing to the same peer pressure that we as a society preach against to our children? I run across a number of couples each year who I have to give permission to live their own lives. That if time doing something is important to them, then focus on the things that will allow them to do that without worry rather than building up a bunch of stuff that would please someone else. If you have to buy something to impress your friends, perhaps you should ask yourself if they are really your friends.

I read through this article and realize that many will take a look at this and think to themselves, where is the financial planning here? There are no numbers. There are no investment selections. There are no directions for special tax treatment. There is no protection or estate planning. To those of you who are wondering, I challenge you to contact me, because there are many people who are wasting hundreds of thousands of dollars if not millions living someone else’s life. By first deciding to bark up the right tree, one can save years of heartache.


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