The last few weeks I’ve met with clients and prospective clients who are very afraid of where our country is headed due to the climbing Federal deficit, the fall in interest rates, and the decline of the dollar vs. other currencies. Some have purchased gold or silver as a hedge against the anticipated fall of US stocks. I understand their concerns, and they are not unfounded.
One of the benefits of getting older is the perspective it provides, especially when it comes to investing and people. (Others might say I’m just getting crotchety, but I digress.) Looking back over the last 23 years, I‘ve heard “This time is different” a few times before.
In 1988, when I started The Asset Advisory Group, people were shell-shocked from Black Monday: October 19, 1987, when they saw the Dow Jones Industrial average fall over 22% in one day. As I worked with worried people to adjust their financial plans for retirement, they told me things would never be the same, because investors would not put their money in the stock market again and it would stay depressed as a result. “This time was different.” Those who invested in bonds and CDs based on their feelings missed the Dow’s climb from 1,739 on October 1987 to 3,975 on February 1994 – a 129% increase over less than seven years.
The fall of 1999 I spent talking with investors who were upset with our philosophy of portfolio diversification. After nearly four years of watching every dot.com provide high double digit returns, they were tired of being diversified in value stocks, real estate, and small US companies. Technology stocks were making a killing, and investing in any other type of company seemed foolish. Emotions in some meetings ran high, because people felt I was keeping them from making the returns their friends and neighbors were telling them about. I would be a rich woman if I had a dollar for every person who told me we were “in a new paradigm of investing”, or “This time is different.” The tech bubble burst in 2000, and it was real estate and small cap value stocks that kept our clients’ portfolios positive in 2000 and 2001.
In 2008 people were shaken again when we experienced a global stock meltdown that was touched off by the credit crisis in August 2007. The bad news dragged on through March of 2009, and comparisons to the Great Depression were made daily. “This time was different.” People were scared, angry and some wanted to move all their investments to cash and get back in when they felt better about the market. I felt a great sense failure when I could not convince one of my long-time clients not to sell out. But clients that kept the faith in the long-term resiliency of the global markets allowed us to rebalance their portfolios – we sold out of bonds and bought into stocks at depressed prices. These investors were rewarded with significant gains as the equity markets roared back in 2009 and 2010, and they recovered their portfolio highs of 2007.
Now investors are afraid of our country’s budget deficit and the status of our currency; gold and silver are being sold as the investor’s solution. “This time is different. “
I agree we have tough decisions to make in this country to get us back on track, but I don’t believe we need to hoard precious metals to protect us. We need to have a personal financial plan in place and execute it with conviction, so no matter what we experience we can survive it successfully. Each financial crisis we experience will be somewhat different, and even though history doesn’t repeat itself, it sure does rhyme. Take it from a crotchety old investor.
Jeannette A. Jones, CPA, CFP®
jjones@taaginc.com
http://www.taaginc.com/
Wednesday, April 27, 2011
Tuesday, April 19, 2011
Confronting Your Personal Debt Ceiling
(from Carl Richard's New York Times' Bucks blog, 4/18/2011 - 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.)
We’ve all made financial commitments like mortgages, rent payments, college tuition and utility bills. When you combine those commitments, you end up with the foundation for a budget. But what happens when those commitments exceed your income?
After we become accustomed to a certain lifestyle, it can be difficult to make adjustments when the amount of money coming in decreases. But unlike the federal government, real people don’t have the option to take a vote and raise their personal debt ceiling. In the real world, increasing your personal debt ceiling only works for so long. At that point, there are only two options:
1. Earn more
2. Spend less
Simple math, tough choices.
Yet again we have another example of how painful it can be when the cold, hard facts of arithmetic smash against the complex, emotional issues of money. The math is simple: if you spend more than you earn, at some point things will have to change.
But once we move beyond the math, things start to get fuzzy fast. Most of us can relate to that sick feeling of comparing what we owe to the amount of money sitting in the bank and knowing it isn’t enough, or the pain of telling children that we simply can’t afford to do something that was incredibly important to them or the awkward discussion with a spouse about which extra expense we have to cut to make ends meet. These conversations aren’t easy, but they have to happen if we want things to change. At some point we can’t continue to kick the can down the road.
To add to the frustration, these decisions are intensely personal. We all want easy answers from some personal finance guru who will tell us what to do. We want a prescription, but this discussion doesn’t work that way.
Sure, there are books that will provide a framework, and learning from others (including Elmo) that have been through this can be helpful. But in the end, your situation is absolutely unique. It will require you to come up with a plan that works for you. Often what one family defines as a need another will view as a luxury, and neither one of them is wrong. In the end, they will both need to satisfy the equation on the napkin: their income must be greater than or equal to their expenses.
At some point in your life, you’ve done the math and realized that your financial commitments were out of whack with your income. How did you fix your problem? If you have children, how are you helping them understand the need for financial balance?
After we become accustomed to a certain lifestyle, it can be difficult to make adjustments when the amount of money coming in decreases. But unlike the federal government, real people don’t have the option to take a vote and raise their personal debt ceiling. In the real world, increasing your personal debt ceiling only works for so long. At that point, there are only two options:
1. Earn more
2. Spend less
Simple math, tough choices.
Yet again we have another example of how painful it can be when the cold, hard facts of arithmetic smash against the complex, emotional issues of money. The math is simple: if you spend more than you earn, at some point things will have to change.
But once we move beyond the math, things start to get fuzzy fast. Most of us can relate to that sick feeling of comparing what we owe to the amount of money sitting in the bank and knowing it isn’t enough, or the pain of telling children that we simply can’t afford to do something that was incredibly important to them or the awkward discussion with a spouse about which extra expense we have to cut to make ends meet. These conversations aren’t easy, but they have to happen if we want things to change. At some point we can’t continue to kick the can down the road.
To add to the frustration, these decisions are intensely personal. We all want easy answers from some personal finance guru who will tell us what to do. We want a prescription, but this discussion doesn’t work that way.
Sure, there are books that will provide a framework, and learning from others (including Elmo) that have been through this can be helpful. But in the end, your situation is absolutely unique. It will require you to come up with a plan that works for you. Often what one family defines as a need another will view as a luxury, and neither one of them is wrong. In the end, they will both need to satisfy the equation on the napkin: their income must be greater than or equal to their expenses.
At some point in your life, you’ve done the math and realized that your financial commitments were out of whack with your income. How did you fix your problem? If you have children, how are you helping them understand the need for financial balance?
Wednesday, April 13, 2011
Small Tasks, Big Impact
We’ve had a slew of things come across our desks recently that are little things that can be done that can go a long way in protecting our assets & our families in various ways. We wanted to share those briefly with you in this week’s blog.
Next of Kin Registry
For our readers who reside in the State of Ohio, the BMV has created a next-of-kin registry to help expedite emergency notification. The registry is a database of emergency contacts for anyone with a valid driver’s license or state identification card. It enables law enforcement, paramedics and other agencies to find a victim's relatives or emergency contact immediately.
All you need to do to register is click here, fill in the information requested and then list the names of those you would want to be contacted in an emergency. It takes just minutes and could save valuable time in letting someone know of any emergency or making crucial medical decisions at a critical time.
At this time, with nearly 8 million registered motorists in the state, only 150,000 have registered for this service. For your sake and the sake of your family and friends, take a few minutes and go sign up today.
Social Security Statements
For those of you who really look forward to getting that green and white social security statement in the mail each year, I have some bad news for you. The Social Security Administration announced last week that they will no longer be sending them out. The good news? This move will save $30 million this year and $60 million in 2012. Provided you’ve been in the workforce for 10 years, you can still generate a report using the retirement estimator available on the Social Security Administration’s website or by simply clicking here.
Another Reason to Check that Credit
Many of you have likely received some sort of e-mail from an organization you’ve done business with or read in the news about the massive security breach at Epsilon, a Texas online marketing company that sends out more than 40 billion e-mails per year on behalf of their clients. According to a SecurityWeek article, the data belonged to a long list of companies that included Best Buy, Brookstone, Capital One, Citi, Home Shopping Network, JPMorgan Chase, Kroger, LL Bean, Marriott Rewards, Ritz-Carlton Rewards, TiVo & US Bank.
The information compromised is believed to be limited to names and e-mail addresses only, but do what you can to be vigilant with any suspicious looking e-mails you may receive in the near future. Also, be sure to visit AnnualCreditReport.com, the government sanctioned website where you can pull a credit report from each of the three major bureaus free of charge one time per year.
One More from the BMV
It was brought to our attention recently by an estate-planning attorney we work with that the Ohio Bureau of Motor Vehicles does not accept powers of attorney from outside sources. They only accept their own, which can be found here. Arriving and waiting in line to re-title a vehicle on another’s behalf can be a tedious process to begin with, finding out the POA form you have with you isn’t valid might be enough to send anyone over the edge. If the need arises to use this form, simply fill it out without a date and keep in a secure location.
We hope these are helpful as we’re always on the lookout to help find ways, both big and small, to have a positive impact on your financial and emotional security. If you have any quick tips or questions, please feel free to comment below.
Have a great week,
Chip Workman, CFP®
cworkman@taaginc.com
http://www.taaginc.com/
Next of Kin Registry
For our readers who reside in the State of Ohio, the BMV has created a next-of-kin registry to help expedite emergency notification. The registry is a database of emergency contacts for anyone with a valid driver’s license or state identification card. It enables law enforcement, paramedics and other agencies to find a victim's relatives or emergency contact immediately.
All you need to do to register is click here, fill in the information requested and then list the names of those you would want to be contacted in an emergency. It takes just minutes and could save valuable time in letting someone know of any emergency or making crucial medical decisions at a critical time.
At this time, with nearly 8 million registered motorists in the state, only 150,000 have registered for this service. For your sake and the sake of your family and friends, take a few minutes and go sign up today.
Social Security Statements
For those of you who really look forward to getting that green and white social security statement in the mail each year, I have some bad news for you. The Social Security Administration announced last week that they will no longer be sending them out. The good news? This move will save $30 million this year and $60 million in 2012. Provided you’ve been in the workforce for 10 years, you can still generate a report using the retirement estimator available on the Social Security Administration’s website or by simply clicking here.
Another Reason to Check that Credit
Many of you have likely received some sort of e-mail from an organization you’ve done business with or read in the news about the massive security breach at Epsilon, a Texas online marketing company that sends out more than 40 billion e-mails per year on behalf of their clients. According to a SecurityWeek article, the data belonged to a long list of companies that included Best Buy, Brookstone, Capital One, Citi, Home Shopping Network, JPMorgan Chase, Kroger, LL Bean, Marriott Rewards, Ritz-Carlton Rewards, TiVo & US Bank.
The information compromised is believed to be limited to names and e-mail addresses only, but do what you can to be vigilant with any suspicious looking e-mails you may receive in the near future. Also, be sure to visit AnnualCreditReport.com, the government sanctioned website where you can pull a credit report from each of the three major bureaus free of charge one time per year.
One More from the BMV
It was brought to our attention recently by an estate-planning attorney we work with that the Ohio Bureau of Motor Vehicles does not accept powers of attorney from outside sources. They only accept their own, which can be found here. Arriving and waiting in line to re-title a vehicle on another’s behalf can be a tedious process to begin with, finding out the POA form you have with you isn’t valid might be enough to send anyone over the edge. If the need arises to use this form, simply fill it out without a date and keep in a secure location.
We hope these are helpful as we’re always on the lookout to help find ways, both big and small, to have a positive impact on your financial and emotional security. If you have any quick tips or questions, please feel free to comment below.
Have a great week,
Chip Workman, CFP®
cworkman@taaginc.com
http://www.taaginc.com/
Wednesday, April 6, 2011
Resetting Expectations
With interest rates remaining near historic lows, many clients have been refinancing their mortgages over the past few months. A lot has changed since they took out their loan or last refinanced, and not just with interest rates. I’ve heard from more than one person who is surprised to find out that you need a credit score of 780 or higher to snag the best rates as well as 20% equity in your home.
A few things to keep in mind when you start shopping for the best rate:
A few things to keep in mind when you start shopping for the best rate:
- Check http://www.annualcreditreport.com/ for a free credit report from each of the three nationwide consumer credit reporting companies. You will receive a detailed listing of all of your lines of credit, open and closed. You now have the ability to check your score for free at http://www.creditkarma.com/, a new web site from TransUnion. This site also give you a credit report card to compare your credit score in each category to the national averages and run scenarios such as how taking out additional credit or closing a line may impact your score. If you do find errors on your report, make sure they are corrected prior to applying for a loan.
- If you have retired since applying for your last loan or refinanced prior to the housing meltdown, the information needed to prove your monthly income may have changed. If you are living off of your investment assets, your advisor can prepare a letter for your lender stating how your income is structured. Many times, it is helpful if we talk to a loan officer or underwriter directly to help them understand the monthly “paycheck” you receive from your portfolio and how that may differ from the income reported on your tax return.
- Don’t automatically refinance with your current lender. A good place to shop for local rates is http://www.bankrate.com/. We have found that many of the smaller banks or credit unions offer competitive rates, lower closing costs and more intuitive underwriting. Feel free to call us for the names of local lenders you can trust and to assist you in comparing offers .
Wednesday, March 30, 2011
Making the Most of Tax Time
This is not a favorite time of year for most of us, because wading through all the paperwork needed to prepare our taxes can be a headache. But if you have to gather up all the information anyway, you might as well use it as an opportunity to improve your financial situation. Here are some ideas:
• Mortgage Interest Deduction - Look at the year-end summary report you received from your mortgage company and see what you still owe on your house and your current interest rate. The national average for a 30 year fixed rate is 4.96%, and some banks here in Cincinnati are offering even lower rates. If you have a mortgage over 6% you should seriously consider refinancing and locking in a lower rate while they are still at historical lows.
• Real Estate Tax Deduction - Chris Carleton mentioned it in her March 9th blog, Taking Advantage of a Decline in Your Home’s Value, but it’s worth mentioning again. Even if you have your home paid off, real estate taxes will continue to be a major housing expense for you, so having your house reassessed after the housing downturn might be worth it. You won’t be able to make the March 31st deadline for this year, but we can help you if you’d like to file for a reduction for next year.
• Interest and Dividend Income - Do you receive 1099-INTs from a variety of banks and brokerage companies? Do you have brokerage accounts that you set up with the intention of doing some investing on your own, but haven’t taken the time? You should hold three to six months of living expenses in very liquid investments in case of emergencies, but more than that and you are missing the opportunity to maximize your income. Consider consolidating these accounts to simplify your life and maximize your interest. You’ll thank yourself next year.
• Charitable Contributions – Do you give money to a wide variety of charities each year? Look at your average giving over a period of years, and consider setting up a donor-advised fund for future gifts. The large deduction in the year you set up the fund will have a much greater tax impact; and you can involve your children or grandchildren in your gifting decisions to pass along charitable family values. In Cincinnati, we have great resources such as the Greater Cincinnati Foundation, where you can establish a donor-advised fund with a $25,000 contribution, and the West Chester Community Foundation.
• College Planning with a Deduction – It felt like it took forever to pay off our college loans when we were first married, so my husband and I want to help our grandson with his college expenses. By setting up a 529 account, we can help him and get a deduction up to $2,000 on our Ohio income tax return. If you want to help a young person with college, this is a great way to do it.
We can’t make the work of filing your taxes go away, but we can help implement one of these ideas. If you would like to know more, please give one of us a call.
Jeannette A. Jones, CPA, CFP®
jjones@taaginc.com
http://www.taaginc.com/
• Mortgage Interest Deduction - Look at the year-end summary report you received from your mortgage company and see what you still owe on your house and your current interest rate. The national average for a 30 year fixed rate is 4.96%, and some banks here in Cincinnati are offering even lower rates. If you have a mortgage over 6% you should seriously consider refinancing and locking in a lower rate while they are still at historical lows.
• Real Estate Tax Deduction - Chris Carleton mentioned it in her March 9th blog, Taking Advantage of a Decline in Your Home’s Value, but it’s worth mentioning again. Even if you have your home paid off, real estate taxes will continue to be a major housing expense for you, so having your house reassessed after the housing downturn might be worth it. You won’t be able to make the March 31st deadline for this year, but we can help you if you’d like to file for a reduction for next year.
• Interest and Dividend Income - Do you receive 1099-INTs from a variety of banks and brokerage companies? Do you have brokerage accounts that you set up with the intention of doing some investing on your own, but haven’t taken the time? You should hold three to six months of living expenses in very liquid investments in case of emergencies, but more than that and you are missing the opportunity to maximize your income. Consider consolidating these accounts to simplify your life and maximize your interest. You’ll thank yourself next year.
• Charitable Contributions – Do you give money to a wide variety of charities each year? Look at your average giving over a period of years, and consider setting up a donor-advised fund for future gifts. The large deduction in the year you set up the fund will have a much greater tax impact; and you can involve your children or grandchildren in your gifting decisions to pass along charitable family values. In Cincinnati, we have great resources such as the Greater Cincinnati Foundation, where you can establish a donor-advised fund with a $25,000 contribution, and the West Chester Community Foundation.
• College Planning with a Deduction – It felt like it took forever to pay off our college loans when we were first married, so my husband and I want to help our grandson with his college expenses. By setting up a 529 account, we can help him and get a deduction up to $2,000 on our Ohio income tax return. If you want to help a young person with college, this is a great way to do it.
We can’t make the work of filing your taxes go away, but we can help implement one of these ideas. If you would like to know more, please give one of us a call.
Jeannette A. Jones, CPA, CFP®
jjones@taaginc.com
http://www.taaginc.com/
Wednesday, March 23, 2011
The Only Question that Matters for Investors
(from Dan Solin's Huffington Post blog, 3/15/2011 - click here for the original post)
The financial media is whipped into a frenzy. There is so much uncertainty. Here's a summary of recent developments:
Money manager Laszlo Birinyi advises"[]These kinds of strong beginnings lead to long and durable bull markets. Hedge fund manager Barton Biggs agrees.
Over at The Wall Street Journal, they're not so sure. Brett Arends listed ten reasons why investors should be worried. His sources are interesting. He relies on an unnamed "European hedge fund manager" who is "worried about China." The source is not buying aggressively, and Arends find that significant. It's quite remarkable what passes for responsible financial journalism at The Wall Street Journal these days.
I get asked for my opinion on many of these issues by readers of my books and blogs, advisory clients and prospective clients. Many can't hide their disappointment when I tell them I have no clue how these events will affect the markets. What's more, neither does anyone else, including those who are so confident of their predictions and who dispense their advice so freely. What's more, I don't care and I don't believe intelligent investors should either. Here's why.
Many studies confirm the relationship between loss of money and suicide. Ask most men what they fear most and they will tell you it is the loss of their money and homelessness. You would think their investing decisions would seek to minimize this possibility. Instead, they are more often focused on the short term consequences of current events. This makes no sense.
The average sixty-year-old will live another twenty years or so. Here's the only question she (and all other investors) should be asking her financial advisor:
Can you financially engineer a portfolio for me, using long term (at least 50 years) data, that will maximize my returns for the amount of risk I will be taking, for the rest of my life, and will minimize the possibility that I will be destitute in my old age?
The good news is that it is very easy to accomplish this goal. We have all the tools and data necessary to do so. The analysis can be based on sound academic, peer-reviewed research, used by savvy pension and trust fund administrators and high net worth individuals. Of course, it's not predictive, but it's far more reliable than relying on financial astrologers. I have rarely met an investor who had such a plan, or who understood that he could get one.
You have a choice. You can listen to the musings of people who believe they can predict the future, or you can plan intelligently for your own future.
The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein. Furthermore, the information on this blog should not be construed as an offer of advisory services. Please note that the author does not recommend specific securities nor is he responsible for comments made by persons posting on this blog.
The financial media is whipped into a frenzy. There is so much uncertainty. Here's a summary of recent developments:
- Bill Gross eliminated U.S. government debt from the Pimco's Total Return Fund.
- Nouriel Roubini ("Dr. Doom") predicts $100 billion in municipal bond defaults over five years.
- Ireland, Greece, Portugal and Spain remain in tenuous financial condition.
- The devastating earthquake in Japan has broad economic ramifications.
- Unrest in Libya and in the rest of the Middle East threatens oil prices.
Money manager Laszlo Birinyi advises"[]These kinds of strong beginnings lead to long and durable bull markets. Hedge fund manager Barton Biggs agrees.
Over at The Wall Street Journal, they're not so sure. Brett Arends listed ten reasons why investors should be worried. His sources are interesting. He relies on an unnamed "European hedge fund manager" who is "worried about China." The source is not buying aggressively, and Arends find that significant. It's quite remarkable what passes for responsible financial journalism at The Wall Street Journal these days.
I get asked for my opinion on many of these issues by readers of my books and blogs, advisory clients and prospective clients. Many can't hide their disappointment when I tell them I have no clue how these events will affect the markets. What's more, neither does anyone else, including those who are so confident of their predictions and who dispense their advice so freely. What's more, I don't care and I don't believe intelligent investors should either. Here's why.
Many studies confirm the relationship between loss of money and suicide. Ask most men what they fear most and they will tell you it is the loss of their money and homelessness. You would think their investing decisions would seek to minimize this possibility. Instead, they are more often focused on the short term consequences of current events. This makes no sense.
The average sixty-year-old will live another twenty years or so. Here's the only question she (and all other investors) should be asking her financial advisor:
Can you financially engineer a portfolio for me, using long term (at least 50 years) data, that will maximize my returns for the amount of risk I will be taking, for the rest of my life, and will minimize the possibility that I will be destitute in my old age?
The good news is that it is very easy to accomplish this goal. We have all the tools and data necessary to do so. The analysis can be based on sound academic, peer-reviewed research, used by savvy pension and trust fund administrators and high net worth individuals. Of course, it's not predictive, but it's far more reliable than relying on financial astrologers. I have rarely met an investor who had such a plan, or who understood that he could get one.
You have a choice. You can listen to the musings of people who believe they can predict the future, or you can plan intelligently for your own future.
The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein. Furthermore, the information on this blog should not be construed as an offer of advisory services. Please note that the author does not recommend specific securities nor is he responsible for comments made by persons posting on this blog.
Don't Confuse the Urgent with the Important
Carl does a great job in the blog below of reminding us of why those things with low urgency, but a high degree of importance on our to-do list deserve our time and attention before it's too late.
(from Carl Richard's New York Times' Bucks blog, 3/21/2011 - 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, BehaviorGap.com.)
(from Carl Richard's New York Times' Bucks blog, 3/21/2011 - 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, BehaviorGap.com.)
Last weekend marked the beginning of spring, and even though there’s still snow on the ground here in Park City, it reminded me that nearly a quarter of the year has come and gone.
Like many of you, I made resolutions in January. There were a lot of important things I wanted to accomplish. And for a few weeks, I did really well. But now it’s March, and part of me is panicked. There’s still so much to be done. But another part of me latched on to the second half of the equation: I still have three quarters of the year to go. What’s the big deal?
The problem results from the distractions that come from things that seem urgent. They cause us to lose our focus on the important issues.
On a day-to-day basis it’s easier to focus on those urgent things that capture your attention. After all, who wouldn’t focus on getting the car fixed over making sure the will is up to date? That seems like a logical decision that trumps the merely important goals you set in January.
Bob Goldman, a financial planner, said that he sees a surge in business around January and February. So at least they’re trying.
But Mr. Goldman added that he often doesn’t see those people again for years. Following through on the big decisions tends to drop down the list quickly when you’re confronted by life’s urgent demands. After all, many of these important goals appear complex, like buying life insurance or setting up college savings accounts. So we often push them aside in favor of the urgent and immediate.
Plus, we enjoy the sense of checking urgent things off a list. The more urgent the task the greater the sense of satisfaction. By comparison, sitting down and working through the details of your personal and financial lives doesn’t offer the same sense of excitement and immediate gratification.
Here’s the danger in all of this though. Once time passes, the important eventually becomes urgent. But by then it may be too late to do much about it.
Think about the stories of friends and colleagues who are dealing with complicated estates because family members let the urgent trump the important. Then there are the parents who didn’t think 18 years would pass so quickly; now they’re unsure whether they can help pay for college.
A friend who is an estate planning attorney noted that people will often come to him in a panic right before taking a trip without their kids. With worst-case scenarios floating through their minds, these couples want their wills done in case the plane goes down or the ship sinks. Since these things take time, it’s often impossible to finish before they leave town. Then, my friend doesn’t hear back from them again until a few days before the next trip.
See a pattern here?!
If there’s one resolution that I hope each of you keeps it’s this: please set aside time each month to tackle these important questions. Yes, you will be tempted to brush them aside until next month because there will be something urgent going on. But you can’t keep making the same resolution every January to deal with your important decisions this year. The tasks will never get smaller if you don’t start dealing with them one by one.
After every financial crisis we often ask, “How did we miss the signs?” Unlike a large-scale crisis that only seems obvious in hindsight, you know that you can prevent a personal financial crisis by tackling the important tasks in your life right now.
Like many of you, I made resolutions in January. There were a lot of important things I wanted to accomplish. And for a few weeks, I did really well. But now it’s March, and part of me is panicked. There’s still so much to be done. But another part of me latched on to the second half of the equation: I still have three quarters of the year to go. What’s the big deal?
The problem results from the distractions that come from things that seem urgent. They cause us to lose our focus on the important issues.
On a day-to-day basis it’s easier to focus on those urgent things that capture your attention. After all, who wouldn’t focus on getting the car fixed over making sure the will is up to date? That seems like a logical decision that trumps the merely important goals you set in January.
Bob Goldman, a financial planner, said that he sees a surge in business around January and February. So at least they’re trying.
But Mr. Goldman added that he often doesn’t see those people again for years. Following through on the big decisions tends to drop down the list quickly when you’re confronted by life’s urgent demands. After all, many of these important goals appear complex, like buying life insurance or setting up college savings accounts. So we often push them aside in favor of the urgent and immediate.
Plus, we enjoy the sense of checking urgent things off a list. The more urgent the task the greater the sense of satisfaction. By comparison, sitting down and working through the details of your personal and financial lives doesn’t offer the same sense of excitement and immediate gratification.
Here’s the danger in all of this though. Once time passes, the important eventually becomes urgent. But by then it may be too late to do much about it.
Think about the stories of friends and colleagues who are dealing with complicated estates because family members let the urgent trump the important. Then there are the parents who didn’t think 18 years would pass so quickly; now they’re unsure whether they can help pay for college.
A friend who is an estate planning attorney noted that people will often come to him in a panic right before taking a trip without their kids. With worst-case scenarios floating through their minds, these couples want their wills done in case the plane goes down or the ship sinks. Since these things take time, it’s often impossible to finish before they leave town. Then, my friend doesn’t hear back from them again until a few days before the next trip.
See a pattern here?!
If there’s one resolution that I hope each of you keeps it’s this: please set aside time each month to tackle these important questions. Yes, you will be tempted to brush them aside until next month because there will be something urgent going on. But you can’t keep making the same resolution every January to deal with your important decisions this year. The tasks will never get smaller if you don’t start dealing with them one by one.
After every financial crisis we often ask, “How did we miss the signs?” Unlike a large-scale crisis that only seems obvious in hindsight, you know that you can prevent a personal financial crisis by tackling the important tasks in your life right now.
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