Over the past two weeks, while the Greek Prime Minister tested the patience of Germany, France and other countries in the European Union, there was another drama playing out.
MF Global Holdings is described on its web site as a brokerage firm that provides ‘indispensable, well-timed insights and hedging solutions’ for its clients. They go on to say their ‘relentless pursuit of market opportunity separates us from the pack. We help clients find an edge in today's fast-paced, ever evolving markets.’ In so many words - we don't just sit around and watch the market, we DO something!
The company's CEO and Chairman, Jon Corzine, was the former Chairman of Goldman Sachs, and had decades of industry experience. He also had significant hubris about his ability to invest based on his ‘well-timed insights’.
Last Friday Corzine resigned from the company after a $6.3 billion bet the company made on European debt did not go the direction his insight told him it would. Now the company has declared bankruptcy, and the FBI is investigating $593 million in client funds that remain missing.
You’re probably tired of hearing about Wall Street financial failures; but MF Global along with the Merrill Lynch, Lehman brothers, and Bear Sterns failures that came before all share a common lesson.
Even the smartest, most well connected investors in the industry are wrong about which way the markets will move, when they will move, and what you should do about it.
Sometimes our clients ask where we think the market is headed and what we should do to prepare, and they are frustrated when we tell them we refuse to offer up predictions or opinions. We don’t refuse just to be difficult; we do it because we realize the next logical step after a prediction is the temptation to do something to avoid what you think is going to happen. But for each and every economic or political issue, there are multiple known and an even greater number of unknown possible outcomes. When Greece agreed to a debt bailout deal with the EU, and the Dow responded with a whopping rally, who anticipated the Prime Minister would decide to put a referendum vote on the decision – causing another drop in the market? We realize that we cannot anticipate every outcome, and we are honest enough to admit it. It doesn’t mean you can’t be a successful investor.
Investors have been taught to look for advice on when to jump in and out of stocks, and the media has reinforced it. Over and over again we have seen people hurt by promoters who sell products that promise to out-perform the market based on an ability to out-maneuver the market. We’ve even seen people hurt by attempts to avoid losses by moving their funds into ‘safe’ investments that can’t keep up with their spending or inflation. None of these tactics are successful, long-term strategies for growing and maintaining your wealth.
Building an investment plan based on what you want to accomplish financially; using low cost investment options to implement your plan to keep more of what your investments earn; and using the jumps and drops in the market to rebalance works. You will rarely hear someone on TV or radio talking about it, because it does not provide the same excitement and drama that MF Global’s strategy did. Somehow I don’t think you would miss it.
Jeannette A. Jones, CPA, CFP®
jjones@taaginc.com
http://www.taaginc.com/
Tuesday, November 8, 2011
Tuesday, November 1, 2011
Stuff-ing
As I continue my commitment to blogging about “stuff” through the remainder of 2011, I’m going to turn my thoughts today to Thanksgiving stuff.
As in stuff-ing.
As in the traditional start of the holidays where we begin to stuff our faces through the end of the year only to dread the consequences as we resolve to shed it all away in the New Year.
How do we break that cycle? No, I still want everyone to enjoy themselves throughout the holidays. But, I will make a simple suggestion. Go ahead and get started with your 2012 exercise plan right now. Keeping moving through those months when we tend to overindulge a bit might not solve the problem, but it will be much easier to lose those extra 10 pounds come January if you’ve avoided making it an extra 20 by getting some healthy habits in place in advance.
This Thursday, November 3rd, is National Start Eating Healthy Day. It’s likely no coincidence that it falls just three weeks before Thanksgiving. Three weeks is just enough time to develop good habits and make a meaningful, productive change. Pick something you can do over these next 21 days to really make a difference to your health. It’ll make that stuffing taste that much better come November 24th.
My commitment to starting off the season right will be to participate in the first annual Thanksgiving Day Race in downtown Cincinnati. Ok, so it’s their 102nd annual, but it’s my first. The 10k run (or walk if you’re so inclined) will be a great way to start off the day and stave off most, if not all, of the guilt to come later that evening. If you’re in town, get the family together and come join the fun!
Even if that’s not quite your speed, the message still applies. In a world where health care costs become more and more a focus in financial planning, the more preventative action we can take by staying as healthy as possible, the lower our exposure will be in an area of our lives where costs are growing faster than any other.
Chip Workman, CFP®
cworkman@taaginc.com
http://www.taaginc.com/
As in stuff-ing.
As in the traditional start of the holidays where we begin to stuff our faces through the end of the year only to dread the consequences as we resolve to shed it all away in the New Year.
How do we break that cycle? No, I still want everyone to enjoy themselves throughout the holidays. But, I will make a simple suggestion. Go ahead and get started with your 2012 exercise plan right now. Keeping moving through those months when we tend to overindulge a bit might not solve the problem, but it will be much easier to lose those extra 10 pounds come January if you’ve avoided making it an extra 20 by getting some healthy habits in place in advance.
This Thursday, November 3rd, is National Start Eating Healthy Day. It’s likely no coincidence that it falls just three weeks before Thanksgiving. Three weeks is just enough time to develop good habits and make a meaningful, productive change. Pick something you can do over these next 21 days to really make a difference to your health. It’ll make that stuffing taste that much better come November 24th.
My commitment to starting off the season right will be to participate in the first annual Thanksgiving Day Race in downtown Cincinnati. Ok, so it’s their 102nd annual, but it’s my first. The 10k run (or walk if you’re so inclined) will be a great way to start off the day and stave off most, if not all, of the guilt to come later that evening. If you’re in town, get the family together and come join the fun!
Even if that’s not quite your speed, the message still applies. In a world where health care costs become more and more a focus in financial planning, the more preventative action we can take by staying as healthy as possible, the lower our exposure will be in an area of our lives where costs are growing faster than any other.
Chip Workman, CFP®
cworkman@taaginc.com
http://www.taaginc.com/
Wednesday, October 26, 2011
The Struggle to Define What We Truly Need
(from Carl Richard's New York Times' Bucks blog, 10/17/2011 - click here for the original post. Carl is a Certified Financial Planner in Park City, Utah. His sketches are archived on the Bucks blog and on his personal Web site, www.BehaviorGap.com.)
There seems to be a constant battle between what we have, what we need and what we think we want.
About a year after my wife and I had our first child, we moved into a neighborhood with homes built decades earlier. Each had two or three bedrooms. We soon noticed that when people had a third or fourth child they moved from the neighborhood in search of more space. One day I mentioned this to my next-door neighbor, who was 70 at the time, and he expressed surprise.
He and his wife had raised their five kids in one of the smallest homes on the block.
One of the most challenging personal finance issues we all face is the ever-expanding definition of “need.” Things we once considered clear luxuries have somehow becomes necessities, often without any consideration of how the change in status happened.
Cars that seemed just fine now seem old fashioned. Then there are children and their cellphones. Only a few years ago it would’ve seemed outlandish for 14-year-olds to need one at all, let alone the latest iPhone.
Achieving clarity about the difference between our needs and wants remains one of the biggest challenges in personal finance and a tremendous source of potential conflict within families. While simple in theory, the calculation is much more complex in practice.
One of the most discouraging parts of modern life seems to be this never-ending sense that we should want more. While this may not be true for everyone, it does seem like it’s become more difficult to be content with what we have. Whether it’s the media, our friends or even our family, it can be a challenge to separate real needs from wants. So here are a few of things to think about:
I’ve talked about some of the ways I’ve seen people look for balance between wants and needs. They include things like sleeping on a decision overnight. My personal rule is that before I buy a book, it has to sit in my Amazon shopping cart for five days.
What have you done to help better define the difference between a want and need? And how have you focused more on being content with what you have instead of always striving for what you think you want?
There seems to be a constant battle between what we have, what we need and what we think we want.
About a year after my wife and I had our first child, we moved into a neighborhood with homes built decades earlier. Each had two or three bedrooms. We soon noticed that when people had a third or fourth child they moved from the neighborhood in search of more space. One day I mentioned this to my next-door neighbor, who was 70 at the time, and he expressed surprise.
He and his wife had raised their five kids in one of the smallest homes on the block.
One of the most challenging personal finance issues we all face is the ever-expanding definition of “need.” Things we once considered clear luxuries have somehow becomes necessities, often without any consideration of how the change in status happened.
Cars that seemed just fine now seem old fashioned. Then there are children and their cellphones. Only a few years ago it would’ve seemed outlandish for 14-year-olds to need one at all, let alone the latest iPhone.
Achieving clarity about the difference between our needs and wants remains one of the biggest challenges in personal finance and a tremendous source of potential conflict within families. While simple in theory, the calculation is much more complex in practice.
One of the most discouraging parts of modern life seems to be this never-ending sense that we should want more. While this may not be true for everyone, it does seem like it’s become more difficult to be content with what we have. Whether it’s the media, our friends or even our family, it can be a challenge to separate real needs from wants. So here are a few of things to think about:
- What if financial happiness is not about getting more but about wanting less?
- What if things start out as wants and become needs not because the thing itself has changed but because our feelings about it have changed?
- What if you can never really get enough of something that you don’t need?
I’ve talked about some of the ways I’ve seen people look for balance between wants and needs. They include things like sleeping on a decision overnight. My personal rule is that before I buy a book, it has to sit in my Amazon shopping cart for five days.
What have you done to help better define the difference between a want and need? And how have you focused more on being content with what you have instead of always striving for what you think you want?
Tuesday, October 18, 2011
Teach Your Children
I attended Homecoming at my alma mater, the University of Cincinnati, this weekend. In the first twenty years after graduating, my only association with the school was through the support of their basketball and football programs. Last year, I reconnected with one of my professors and have become more actively involved by being a guest speaker in the classroom and joining the Foundation’s Planned Giving Committee and the Economic Center’s Financial Education Initiative Committee. Through each relationship, I am gaining insight into how children continue to be woefully unprepared for their financial future.
Many of the students to whom I spoke in a Careers class were not interested in a career in finance. However, I was able to get their attention when I demonstrated what the power of compound interest and time could do to a small investment (ten songs a week on Itunes) and the impact even a small credit card balance can have for many years. I was amazed this was new information to a class ranging from sophomores to seniors!
Through the committee at the Economic Center, we are reaching out to area schools and offering them a financial curriculum and access to professionals in the community to assist their efforts. This will be an uphill battle with the continual budget cuts the schools face. After all, finance is an elective, right? When are kids ever going to need to know how to balance a checkbook?
I don’t have children of my own and have been removed from our educational system for too long. This past year has served as an Aha! moment for me. My reconnection to UC has helped to explain why I see so many clients whose retirement becomes endangered because they feel obligated to bail their children out of a financial hole. If basic budgeting, saving and investing were a core part of our children’s education, this might not be the case.
While school may not be the place for your children or grandchildren to learn about finance, you can lead by example and look for ways to instill good financial habits. There are opportunities on a daily basis to teach children financial skills - by explaining the difference between a need and a want, showing them that saving a little can add up to a lot, and giving them the opportunity to learn the financial and emotional benefit to helping those in need. If you take the time to ensure your children are on a path to financial success, you just may be ensuring that you stay on one as well.
Christine L. Carleton, CFP®
clcarleton@taaginc.com
http://www.taaginc.com/
Many of the students to whom I spoke in a Careers class were not interested in a career in finance. However, I was able to get their attention when I demonstrated what the power of compound interest and time could do to a small investment (ten songs a week on Itunes) and the impact even a small credit card balance can have for many years. I was amazed this was new information to a class ranging from sophomores to seniors!
Through the committee at the Economic Center, we are reaching out to area schools and offering them a financial curriculum and access to professionals in the community to assist their efforts. This will be an uphill battle with the continual budget cuts the schools face. After all, finance is an elective, right? When are kids ever going to need to know how to balance a checkbook?
I don’t have children of my own and have been removed from our educational system for too long. This past year has served as an Aha! moment for me. My reconnection to UC has helped to explain why I see so many clients whose retirement becomes endangered because they feel obligated to bail their children out of a financial hole. If basic budgeting, saving and investing were a core part of our children’s education, this might not be the case.
While school may not be the place for your children or grandchildren to learn about finance, you can lead by example and look for ways to instill good financial habits. There are opportunities on a daily basis to teach children financial skills - by explaining the difference between a need and a want, showing them that saving a little can add up to a lot, and giving them the opportunity to learn the financial and emotional benefit to helping those in need. If you take the time to ensure your children are on a path to financial success, you just may be ensuring that you stay on one as well.
Christine L. Carleton, CFP®
clcarleton@taaginc.com
http://www.taaginc.com/
Tuesday, October 11, 2011
The Benefit of Perspective
It's official. I'm getting older.
I blew my right knee out 2 weeks ago at the gym and have to have surgery to repair it, and I‘ve caught myself saying things like ‘back when we were kids….’
But there’s an upside to getting older too. My husband and I enjoy our adult kids, and our second grandson is due any day now. I love my job. Life is good.
Getting older has also given me the perspective to deal with the financial environment we’ve been experiencing since 2007, and the daily gyrations of the market this year.
In October 1987, the stock market dropped 20% in one day. Can you imagine seeing a 2,200 point drop in the Dow Jones Industrial average cross your computer screen today? We baby boomers were between 41 and 23 years of age then, so we still had years left to work, or we were just getting started. As one client put it, ‘I didn’t have any money then, so it didn’t really matter to me.’ Now it matters to us, because the first of the boomers turned 65 this year. As we retire or approach retirement, the daily drops and dismal economic reports create much more anxiety than that drop did 24 years ago. You add the technology bubble of 1999 to 2002, the Great Recession of the last four years, and many of us are beginning to feel picked on.
I get it. But the Dow Jones was 1,738 after the Crash of ’87, and it closed at 11,433 today as I write this blog. Our economy has grown, and the world outside the US has grown even faster. We have benefited from it financially during our lifetime. We need to understand that what we are going through now is not unusual, it's just happening to us at a time when we are feeling especially vulnerable.
Market climbs and drops will continue to happen in the future, maybe with even more regularity and severity with the speed of technology and change that exist today. But before you rush for your Maalox, consider that we will be retired for nearly as long as some of us worked. We have to have exposure to stocks to benefit in the same way we did over the 30 plus years of our working lives. We won’t be spending it all in one year, and we shouldn’t be viewing our investments as a month-by-month test of returns.
As we say time and again, the most important issues to focus on are those that we can control:
I blew my right knee out 2 weeks ago at the gym and have to have surgery to repair it, and I‘ve caught myself saying things like ‘back when we were kids….’
But there’s an upside to getting older too. My husband and I enjoy our adult kids, and our second grandson is due any day now. I love my job. Life is good.
Getting older has also given me the perspective to deal with the financial environment we’ve been experiencing since 2007, and the daily gyrations of the market this year.
In October 1987, the stock market dropped 20% in one day. Can you imagine seeing a 2,200 point drop in the Dow Jones Industrial average cross your computer screen today? We baby boomers were between 41 and 23 years of age then, so we still had years left to work, or we were just getting started. As one client put it, ‘I didn’t have any money then, so it didn’t really matter to me.’ Now it matters to us, because the first of the boomers turned 65 this year. As we retire or approach retirement, the daily drops and dismal economic reports create much more anxiety than that drop did 24 years ago. You add the technology bubble of 1999 to 2002, the Great Recession of the last four years, and many of us are beginning to feel picked on.
I get it. But the Dow Jones was 1,738 after the Crash of ’87, and it closed at 11,433 today as I write this blog. Our economy has grown, and the world outside the US has grown even faster. We have benefited from it financially during our lifetime. We need to understand that what we are going through now is not unusual, it's just happening to us at a time when we are feeling especially vulnerable.
Market climbs and drops will continue to happen in the future, maybe with even more regularity and severity with the speed of technology and change that exist today. But before you rush for your Maalox, consider that we will be retired for nearly as long as some of us worked. We have to have exposure to stocks to benefit in the same way we did over the 30 plus years of our working lives. We won’t be spending it all in one year, and we shouldn’t be viewing our investments as a month-by-month test of returns.
As we say time and again, the most important issues to focus on are those that we can control:
- Do you have a plan?
- Are you diversified?
- Are you spending at a rate that is reasonable for your resources?
Tuesday, October 4, 2011
More & More "Stuff"
The response received from our recent blog on how to handle personal property in dealing with estate planning was an eye opener. From precious heirlooms to misperceptions about what’s trash and what isn’t, it’s clear that from aging parents to siblings to what to hand down to our own children, this issue seems to invade almost all of our lives in one form or another.
At the risk of staying on my soapbox about our unhealthy relationship with “stuff” a bit too long, I’ve decided to continue down the road with this topic, focusing on various angles through the remainder of the year. This week, I’d like to start by recapping some of the great tips and comments we received from clients, attorneys and other readers that I thought were well worth sharing.
- One client shared a story of a grandmother who would promise something to offspring on various occasions, but could never remember who she’d promised what. The result was multiple items being promised to multiple people, causing disappointment within the family. In addition, certain items of sentimental value to some family members were sold to an antiques dealer as the grandmother simply had no idea they meant anything to anyone. The bottom line here – the importance of communication when it comes to these sometimes difficult situations and documenting whatever is ultimately communicated.
- A recommendation came from a local attorney specializing in helping families, especially those with family businesses, with discussions around succession, philanthropy and a wide range of strategic planning. If the time has come to inventory and auction a family member’s assets, he recommends Everything But the House. Located in Cincinnati, EBTH will inventory and run an online auction to liquidate. This helps the seller retain top dollar for their items as it’s not subject to a one day only, live event.
Coincidentally, a family friend used this service when downsizing from their family home to a riverfront condominium. They enjoyed the process and handled the emotional component by taking a digital photo of each and every item. Now, whenever a sentimental urge strikes, they can “visit” their old possessions via a well organized catalog stored on their computers and reminisce.
- Last but not least, a local estate planning attorney provided this straightforward tip. He learned a while back that it’s great to ask grandma or grandpa, mom and dad or whoever in the family may need the nudge, to label items, especially artwork. This avoids the potential debates over whether the item is truly worth good money, or was a $10 print from Home Goods.
I thank all of those who sent comments and tips on how they’ve handled their “stuff” issues and certainly felt that these were worth sharing. Please continue to pass along your stories and observations about how you and your family have handled issues surrounding “stuff” in your lives.
Have a great week!Wednesday, September 28, 2011
The Ever-Shifting Balance Between Resources & Dreams
(from Carl Richard's New York Times' Bucks blog, 9/20/2011 - click here for the original post. Carl is a Certified Financial Planner in Park City, Utah. His sketches are archived on the Bucks blog and on his personal Web site, www.BehaviorGap.com.)
Most of us have limited resources, like time, money, energy and skills. At the same time, we have needs, goals and dreams. All too often they exceed the limited resources we have, so balancing these two areas of our personal economy can be tricky. We also need to understand that over time both of these circles change.
Sometimes the resources we have will be greater and allow us to do more of the things we want. Other times our needs and wants will seem to dwarf the limited resources we have to throw at them.
But it’s not something that we decide once and then check off the list. It’s a challenge we have to revisit regularly. So here’s how to think about both of the circles.
First, we need to stop focusing on things outside our control. When we do that, we miss opportunities during both good times and bad (like now) to find our financial balance. Don’t put off making important and necessary adjustments, because no one else will do it for you.
Second, we need to be honest about whether our goals are realistic given our resources. You may want to retire at 50, but if you haven’t been saving money regularly, that’s not likely to happen. Aim for things that really matter to you, but don’t set yourself up to fail before you ever start. Remember: your goal is maintaining balance, not achieving perfection.
Finally, look for new ways to make the balancing act work for you. Only you know your goals and only you understand what resources you can dedicate to achieving your dreams. Get the help you need to figure out the details, but it’s up to you to keep these two areas in balance.
It’s amazing the changes that I see in people once they figure out how to match their dreams with their resources. They worry a lot less day to day about things they have no control over. They spend more time with the people they love and doing things that make them happy. Even if their balance between resources and goals doesn’t look like anyone else’s, it’s still getting them where they want to go.
And that is all that matters.
Most of us have limited resources, like time, money, energy and skills. At the same time, we have needs, goals and dreams. All too often they exceed the limited resources we have, so balancing these two areas of our personal economy can be tricky. We also need to understand that over time both of these circles change.
Sometimes the resources we have will be greater and allow us to do more of the things we want. Other times our needs and wants will seem to dwarf the limited resources we have to throw at them.
But it’s not something that we decide once and then check off the list. It’s a challenge we have to revisit regularly. So here’s how to think about both of the circles.
First, we need to stop focusing on things outside our control. When we do that, we miss opportunities during both good times and bad (like now) to find our financial balance. Don’t put off making important and necessary adjustments, because no one else will do it for you.
Second, we need to be honest about whether our goals are realistic given our resources. You may want to retire at 50, but if you haven’t been saving money regularly, that’s not likely to happen. Aim for things that really matter to you, but don’t set yourself up to fail before you ever start. Remember: your goal is maintaining balance, not achieving perfection.
Finally, look for new ways to make the balancing act work for you. Only you know your goals and only you understand what resources you can dedicate to achieving your dreams. Get the help you need to figure out the details, but it’s up to you to keep these two areas in balance.
It’s amazing the changes that I see in people once they figure out how to match their dreams with their resources. They worry a lot less day to day about things they have no control over. They spend more time with the people they love and doing things that make them happy. Even if their balance between resources and goals doesn’t look like anyone else’s, it’s still getting them where they want to go.
And that is all that matters.
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