Does Greece Really Matter?

The Bigger Picture for You and Your Portfolio

Originally in Forbes“Greece is a tiny player in global capital markets. Its default is 100% certain,” says Larry Swedroe, Director of Research for The BAM ALLIANCE and the author of 14 books on investing, including his most recent, The Incredible Shrinking Alpha, co-authored with Andrew Berkin.

“The only question is how much and what they default on,” Swedroe continues. “But with a GNP that is similar to Rhode Island’s, Greece’s default should have little to no impact on the world’s economy, at least not directly.”

So why is everyone so worried?

Greek crisis

Because raging forest fires are kindled from a single, tiny spark. “Greece’s default could trigger a broader contagion, like a run on Portuguese banks or a lack of confidence in the ECU, that may have wider ranging implications for larger economies,” says Swedroe, my colleague.

Budgeting Guide for the Rich

Originally in Forbes“You don’t really do this stuff—do you?” The question came from a major network anchor after the camera stopped rolling. The topic was budgeting.

He certainly isn’t obtuse, and he wasn’t being patronizing or condescending. It was a legitimate question that accurately reflects the underlying perception held by most people in any demographic–that budgeting is for those just scraping by and young people just getting started. A tedious chore reserved for those lacking the means to do otherwise. A humble state from which most of us hope to graduate.

rich

But this is a misconception. In truth, the budgeting process can help people at every stage of life and every income level articulate and align their deeply held values with their financial priorities, which is the first step on the path to integrating money and life. However, there is more to be gained from the discipline of budgeting (at least in terms of raw dollars) for those of means. Better said, there is less to be lost by families who earn especially high incomes. 

A Good Financial Planner Is Like This Year’s Hot Pitching Prospect

Originally in MoneyLike the Blue Jays’ Daniel Norris, a good financial planner is true to him- or herself.

“Stop asking questions, Maurer, and do what I tell you to do,” said the general agent for the Baltimore region of a major life insurance company.

“I made over a million dollars last year!”

“I buy a new Cadillac every two years — cash on the barrelhead.”

I was told how to dress: Dark suits, white shirts, and “power ties” that weren’t too busy. Light blue shirts were allowed on Wednesdays. Never wear sweat pants, even to the gym. Enter and exit the gym in a suit. Your hair should never touch your ears or your neck. Facial hair was strictly forbidden. Jeans, outlawed.

When you have a “big fish on the hook,”

Level: Can a budgeting app change the way we bank?

Originally in Forbes“Level is dedicated to rewriting the financial rulebook to create a secure future for the next generation.” That’s budgeting app Level Money’s stated mission, which can be found on their website’s “About Us” page. But even as lofty as that objective sounds, co-founder and CEO Jake Fuentes says the company’s sights are set even higher.

“Basic everyday money management,” he suggests, could be “the first step toward changing—or creating—the next generation’s banking structure.”

An app that hopes to change the way the next generation banks? I’m listening.

LevelMoney-HandTableFlux

 

The Keys to Effective Budgeting: Autonomy and Automation

Originally in ForbesMost people avoid budgeting because they consider it an exercise in repressive tedium. But it doesn’t have to be. By applying the science of motivation, economic evidence and the art of creativity, the apparent boredom of budgeting and saving can be remade into part a life-giving financial rhythm.

In his book, Drive, Daniel Pink teaches us that most institutions still use outdated science to motivate. Known as the “carrot-and-stick” approach, Pink demonstrates that the archaic addiction many organizations have to extrinsic motivation is far less effective than intrinsic motivation, which comes from within. The most successful resolutions are those autonomously motivated. In short, the word could is more effective than the overused should.

So, please hear this: Only budget if you want to, on your terms. It’s up to you.

freedom

A Misleading Moniker: Financial Literacy Month

Originally in ForbesApril is National Financial Literacy Month, and while I would never argue against financial literacy, I have a fundamental problem with the moniker. Who, after all, would willingly step forward and proudly announce themselves illiterate—at anything?

illiteracy

Unfortunately, I believe that’s what fully embracing the financial literacy movement requires. It positions financial educators as the Dickenses of currency and those who struggle with money as the collective Oliver Twist. Yes, it’s unfortunately true that too many Americans lack optimal—and perhaps even sufficient—personal financial education. But a sweeping declaration that labels the majority of the country financially illiterate does little to advance the cause. And it may even slow the progress we seek.

‘The One-Page Financial Plan’—Simple, But Not Simplistic

Originally in ForbesSimple is hot, even fashionable. But in many cases, it’s for all the wrong reasons. Simple is easier to pitch, explain and sell, and therefore also easier to receive, understand and buy. But when simple devolves into simplistic, becoming a one-dimensional end instead of a user-friendly means, it’s no longer an advantage and may actually be doing damage. Not everything can be turned into a tagline, a rule of thumb or a short cut.

Therefore, when my colleague and New York Times contributor Carl Richards first asked me a couple years ago to think about what a financial plan might look like if it was constrained to a single page, I was skeptical. After all, I’d dedicated my life and work to helping people, primarily in their dealings with money, wholly through the written and spoken word. The fullness of that education seemed impossible to responsibly confine to a single page. Then I read Carl’s new book, The One-Page Financial Plan

OnePagePlan_napkin

At 208 pages, it may be a tad shorter than most personal finance books, but it’s obviously longer than one page. There is, however, a single page in it that I believe will help you understand why the book was written and how it could benefit you. On page 11, toward the end of the book’s introduction, Richards shares with us his family’s first attempt at an actual one-page financial plan.

3 Ways To Write Your Own Story, Like Baseball’s Daniel Norris

Originally in ForbesYesterday, a bearded 21-year-old surfer who lives in a 1978 VW bus, and on a self-imposed annual allowance of $10,000, mowed down my beloved Orioles with a 96-mile-per-hour fastball.

Blue Jays pitcher Daniel Norris isn’t striving to make a statement with his apparently Spartan existence. He’s simply choosing to live life according to his priorities. He’s writing his own story.

According to ESPN, Norris’ values system is strengthened by generational ties and rooted in the topography of Johnson City in northeast Tennessee: “Play outdoors. Love the earth. Live simply. Use only what you need.”

The point of this article is not to compel you to adopt Daniel Norris’ values, but to convince you to live by your own. Here are three ways to do so: 

Putting Money In Its Place

Originally in ForbesWhat we believe about money will impact how we use it. Unfortunately, a central belief most of us hold about money is fundamentally flawed. We believe that money is either good or bad when, in reality, it is neither.

5-in-1-Tool-Kit-Money-Clip

A belief that money is bad certainly is the minority mindset. But it may be a more dangerous conviction than its inverse, if only because it appears virtuous. After all, how could using less water, less square footage, less medication, less natural resources — less money — be a bad thing? Perhaps because there’s a deceptively short distance between being pro less-[fill-in-the-blank] and becoming anti-[fill-in-the-blank]. And if we’re anti-money, we may also become anti-people-who-have-money, including ourselves if such a circumstance arose.

A friend of mine has a huge heart for people with less — I mean, really less. So much so that he dedicated his life and work to serving them. He regularly goes to the world’s most deprived places, using his powerful combo of empathy, education and experience to rally the necessary aid. Once, when he received a sudden sum of money, I asked him if he was capable of committing financial suicide — by which I meant divesting himself of all the extra decimal places in his bank account — simply because it wouldn’t feel right for him to have such a possession as one so wholly dedicated to the world’s underserved communities. He acknowledged it was possible.

The far more common belief is that money is inherently good. Although this belief appears innocuous at first blush, it’s important to consider its logical conclusion. If money is good, then more money is better. If so, we might be inclined to accept a common lament as true: “If I only had more money, I’d have a better life.” Inevitably, money becomes personified, and thus becomes an unconquerable competitor pitted against the actual people in our lives. In this reality, our friends and family simply can’t compete with money. People let us down, while money only promises to make our hopes and dreams come true.

We need to put money in its place. Specifically:

Money is a neutral tool that can be used for good or ill.

That’s it.

When we believe that money is bad, we typically handle it poorly and strain our relationships. When we believe that it’s good, we tend to put money in competition with people and strain our relationships.

3 Questions That Will Get Your Finances — and Life — on Track

Originally in MoneyFew things seem more diametrically opposed than managing money and spiritual enlightenment. But not everyone sees it that way. Some very influential people in the financial advisory community have dedicated their lives to helping advisers assist clients deal with the more personal elements in personal finance.

Consider George Kinder, the Harvard-trained economist-turned-philosopher-turned-CPA. He managed to evolve his tax practice into a comprehensive financial advisory offering, with supporting methodology, while on the successful path to becoming a Buddhist teacher based in Cambridge, Mass. and Hana, Hawaii.

railroad tracks

Within the advisory community, Kinder is almost universally known as the “father of life planning.” To many advisers, his work is the seminal, much-needed missing link between life and money. He originally articulated his views in his book, The Seven Stages of Money Maturity. Many more advisers, however, envision Kinder playing the ukulele on a magic carpet — just a little too “out there” for mainstream consumption and practical application. Having moved from the camp of skeptics to the camp of adherents myself, I invite you to consider what could become one of the most valued tools in a financial planning practice: George Kinder’s Three Questions.