The Action Plan App

This is the 16th and final exercise in a series designed to walk you through an entire financial plan.  The exercise is embedded in an Excel spreadsheet you can download and save for personal use.  You can read the backdrop for the exercise HERE, or just jump right in with the instructions given below:

The Action Plan is broken down categorically into the various sections of our comprehensive financial plan blog series.  As you organize each of the Apps you’ve completed, you’ll be able to carry the actions you’d like to take over to the Action Plan.  Each section will give you an opportunity to describe the fundamental change you want to improve your life as well as the practical change steps that you intend to take.  Beside each action in each section, you’ll be able to name a responsible party to complete the action.  It may be you or your spouse, or it may be an action that an estate planning attorney or financial planner will help you complete.

Then, you’ll have a column in which you’ll be able to prioritize all of these actions. Even if you have the money to implement everything at once, you definitely don’t have the time.  If you don’t prioritize, you may become overwhelmed with the task at hand and give up.  Finally, you’ll have a column to write in a date when it’s completed.  Give yourself the chance to feel that endorphin rush of checking off a to-do.  You deserve it!

Click HERE for the Action Plan app! And of course, you can also read more on the topic in the book Jim and I co-authored, The Ultimate Financial Plan, in Chapter 16, “The Gift of Action: Your Plan For Money And Life.”

Everything Counts

by Jim Stovall

I’m a firm believer in the concept that we never do anything, good or bad, that we don’t get paid for.  Some of the good things you may do may not be immediately or obviously rewarded, but I believe they will be; and if someone does something bad, it may seem—in the short term—that they’re getting away with it, but consequences are a universal law.

Everything we do matters in the grand scheme of things.  There are some things that seem more critical than others, but if we will step back and examine it, we will realize that the crisis comes from our performance not external factors.

Recently, I enjoyed the NBA playoffs.  It seems like basketball, more than any other sport, often comes down to what sports announcers or fans would call a last-second critical shot.  In reality, if a team needs a last-second basket to win the game, that single basket counts no more or less than if they had made it immediately after the opening tipoff at the beginning of the game.  In fact, often the last-second basket seems critical because a team may have played poorly at some point in the first half, and the crisis comes to the surface at the last second.

Last college football season, fans watched in frustration and anguish as a young man from Stanford University missed a critical field goal.  Obviously, you would expect a kicker at the major college level to routinely make that field goal; however, if the team had simply gotten another first down in the second quarter or if a receiver had not dropped a pass on the opening drive of the game, Stanford might never have needed that field goal in the last second of the game.

Many crises we face in our personal and professional lives are self-induced.  We put ourselves in a financial or time constraint and then need some last second heroics to emerge unscathed.  Success in life is not about seeing how close we can get to the edge without going over the cliff.  While there are last-second emergencies and crunch times in everyone’s life, the majority of stress and frantic last-minute efforts could be avoided by prior planning.

Too many people who face last-minute financial or deadline emergencies based their planning on a best-case scenario.  If you don’t plan for the inevitable delay, flat tire, or budget overrun, you will live your whole life facing the frantic last-second shot to stay in the game.

As you go through your day today, plan to win in every area of your life beginning with the first play of the game, not just the last one.

Today’s the day!

Finding A Financial Advisor App

This is the 15th exercise in a series designed to walk you through an entire financial plan.  The exercise is embedded in an Excel spreadsheet you can download and save for personal use.  You can read the backdrop for the exercise HERE, or just jump right in with the instructions given below:

Fiduciary Questionnaire

The compensation methodology and regulatory oversight of your financial advisor are not the only thing to consider when choosing an advisor, but they are a very important part of the picture.

You can also navigate directly to the following website to find a downloadable, printable questionnaire you can use to ask your advisor or a prospective advisor to complete for you.  At the end of the questionnaire is a Fiduciary Oath you should ask your current or prospective financial advisor to sign, showing their willingness to put your interests ahead of their own, or those of their company.

Navigate to the Fiduciary Questionnaire by clicking HERE.

And of course, you can also read more on the topic in the book Jim and I co-authored, The Ultimate Financial Plan, in Chapter 15, “The Gift of Discretion: Choosing a Financial Advisor.”

Gratitude and Gratuity

by Jim Stovall

During the current economic downturn, I realize many businesses and individuals are having a difficult time making ends meet.

Recently, my coauthor Tim Maurer and I released a book dealing with money and personal finance (www.UltimateFinancialPlan.com).  As a result of the publicity and promotion of that book, I have had the opportunity to talk with many groups and individuals about the economy, budgets, and personal finances.  While speaking to a group of people who work in the restaurant and food industry, I was shocked to find out how much economic conditions affect consumers’ tipping practices.

My first life experience in the world of business and commerce involved delivering newspapers.  I quickly discovered if I was reliable, dependable, got the newspaper on the porch or where the customer wanted it, and kept it dry during inclement weather, I could receive some generous tips.  I found that good service often brings a disproportionately higher tip.  This is to say that many times for slightly exceeding expectations, you can receive a tip two or three times larger than you would otherwise expect.

When you and your family or colleagues go out to eat, everyone knows that the standard expectation for tipping is a minimum of 15%.  If you cannot afford to comfortably pay for your meal and minimal tip within the context of your budget, you simply cannot afford to eat out.  Regardless of your personal financial condition or the prevailing economic trends, the person who serves you deserves to be compensated appropriately.

Experts disagree on how you should handle substandard or poor service.  Some feel you should not tip at all or limit your tip while others feel you should discuss your situation with your server or, better yet, management.  I feel if you’re going to withhold a tip, the server should understand why.  Withholding a tip should indicate the service was so poor that if your meal had been deficient to the same extent, you would discuss not paying your bill with the management.

Apparently, many consumers find a number of minor complaints in their own minds sufficient enough to withhold the tip, but they never express their displeasure or the reason for their actions with the server.  Tips are discretionary as are most standard expectations in polite society.  If you withhold a tip without discussing it with your server, it says more critical things about you than the waiter or waitress.

I have a personal problem with establishments that put a standard gratuity on the bill.  I guess there’s nothing wrong with it if it’s disclosed up front, but I simply think the practice defeats the time-honored tradition of tipping.  Invariably if there is a mandatory tip already added to my bill, that is generally all I will pay.

One of my favorite quotes from President Harry Truman says, “We will give millions for charity but not one penny for tribute.”  President Truman was expressing the sentiment that we enjoy being generous but not having things taken from us or required of us by people who feel entitled to what we have.

As you go through your day today, remember the people who serve you, and treat them as you would want to be treated.

Today’s the day!

Fulfillment Plan App

This is the 13th exercise in a series designed to walk you through an entire financial plan.  The exercise is embedded in an Excel spreadsheet you can download and save for personal use.  You can read the backdrop for the exercise HERE, or just jump right in with the instructions given below:

This chapter’s Timely Application has three parts.  The first part is for all readers of any age, and it is an exercise to give you the opportunity to define what the optimal retirement looks like for you.  After defining retirement on your own terms, you’ll conduct some self-analysis placing your own personal tendencies on a continuum ranging from “spendthrift” to “hoarder.”  (It’s always interesting to revisit your Personal Money Story to pinpoint events in life that may have helped create these tendencies.)  After examining your strengths and weaknesses regarding short-, mid-, and long-term planning, you’ll articulate what your Fulfillment Plan would ideally look like.

The second and third parts of this exercise are for readers within striking distance of a transition toward some form of retirement.  The Retirement Income Sources tab will help you determine what your sources of income will be in retirement.  Then, contrast your expected income with a Retirement Budget to complete this chapter’s exercises.

Click HERE to access the Fulfillment Plan app!

The Art of Amazing

by Jim Stovall

Defining success is the initial barrier most people face.  If they instantly had the opportunity to flip a switch and become successful, they haven’t determined what that illusive term “success” means to them.  Success comes in many sizes and shapes.  It is not a one-size-fits-all proposition, but instead success is a custom-made garment designed to serve you throughout your life.

Once you have defined what success means to you, you’ve got to have a plan of action for how to get there.  I have been searching for a number of years to find a simple, one-step process to help people move toward success as they have defined it.  As usually happens, great wisdom comes not in the form of an insightful answer, but instead, it appears as a penetrating question.  Once you have defined what that customized success looks like for you, and you are pursuing it as a part of your daily routine, you simply need to ask the following question as you approach each task.  “What would I do right now if I were amazing?”

This seems to cut through the clutter and clarify the critical issue faster than anything I have ever found.  The question, “What would I do if I were amazing?” doesn’t require us to be amazing or even act like we’re amazing.  It simply assumes we have the ability to act amazing when dealing with the single task before us at any given point in time.

Lifetime goals can be broken down into long-term objectives and short-term activities; but at some point, no matter what our goal, we are faced with the next single task at hand.  It may be as simple as a phone call, a meeting, or a conversation.  It may require us to meet or greet a new person.  But whatever that activity, if we can answer the question, “What would I do right now if I were amazing?” we then stand at the fork in the road and are faced with that inevitable question, “Do I do the least I can do, the minimum that is expected, or will I perform this next task as if I were amazing?”

If you perform enough tasks at that level, soon people will begin to say of you, “That person is amazing,” and they will be right.

As you go through your day today, accept the fact that you won’t always have the right answers, but from now on, you’ve always got the right question.

Today’s the day!

Tax Myths And Rules App

This is the 11th exercise in a series designed to walk you through an entire financial plan.  The exercise is embedded in an Excel spreadsheet you can download and save for personal use.  If you haven’t yet, please read the posts divulging the 5 Tax Myths and the 5 Tax Rules.  If you have, you’re ready to jump into the exercise with the short explanation below:

Tax Myths & Rules

Put your own tax acumen to the test by reviewing each of the Tax Myths and Rules to see how well you’re avoiding and applying them in your life.

With the aid of this spreadsheet, you’ll be able to examine your own posture toward each of the five tax myths and rules.  You can then determine what actions you can take to avoid letting tax implications lead instead of follow in your financial planning.

Click HERE to access the Tax Myths & Rules App!

Annuity Audit App

This is the 10th exercise in a series designed to walk you through an entire financial plan.  The exercise is embedded in an Excel spreadsheet you can download and save for personal use.  You can read the backdrop for the exercise HERE, or just jump right in with the instructions given below:

It is my hope that this is an extremely brief exercise for you, but many people who have long-term relationships with folks in the insurance, brokerage, or banking industries have a lifetime of annuities built up.  If that is your scenario, it is very important that you do this exercise to get a handle on where your money is and what it is doing (or not doing).

When you did your Personal Balance Sheet or Mutual Fund Audit App, you probably pulled together the statements for any annuities you own.  These statements often lack the information you’ll need for this exercise, so I also want you to pull together each of the contracts you received at the inception of your annuity policies as well.  Then, using the App (link below), fill in the information cataloging the following: owner[i], annuitant[ii], beneficiary[iii], contract value, surrender value, cost basis (the sum of your contributions), and the surrender schedule.  Some of this will be on your statement, but the remainder will be in your policy contract. You may have to do some digging.

Once you’ve collected the information, the analysis should start with a diagnosis of the investment value.  If it is a fixed annuity, you’ll know very quickly if the rate is competitive with today’s rates.  If it is a variable annuity, examine how it has performed versus the various benchmark indices.  If it is an equity indexed annuity, the chances are very good that it is not a phenomenal investment, but it also probably has a very long and steep surrender charge which may make it prohibitive to move at this time.

If you determine you’d prefer to be out of an annuity contract, here are the questions to ask:

  • What, if any, surrender charge exists?
  • Is the surrender charge cost prohibitive?
  • How much longer will the surrender charge last?
  • How much have you contributed (what is your cost basis)?
  • How substantial would the tax impact be (would you have to pay a lot in taxes)?
  • Is there a gain on which you would have to pay a penalty if you are under age 59½?

Again, remember to make these decisions slowly because there are many moving pieces with annuities.  It is best to speak with a fee-only Certified Financial Planner™ practitioner AND a Certified Public Accountant prior to making any final decisions.

Click HERE to access the Annuity Audit app!


[i] The person who made the investment in the annuity

[ii] The person upon whose life the actuarial calculations in the annuity policy were based (this is often the same person as the owner)

[iii] The person or people to whom any annuity proceeds will be directed upon the death of the annuitant

Long-Term Disability Income and Long-Term Care Insurance Apps

In order to help you navigate the two most complex forms of personal insurance, I’ve created two “apps”–in the form of Excel spreadsheets–that you can use to create a plan, analyze any policies you have and obtain apples-to-apples quotes for new policies, if needed.  You can find the backdrop for the disability income exercise HERE and the long-term care exercise HERE, or just jump right in with the instructions given below:

Screenshot 2017-03-08 11.52.30These exercises are each a three-step process.  Step One is to determine what you need.  This is accomplished by writing out a Disability Plan if you are in your 30s, 40s or 50s.  If in your 50s, 60s, or beyond, you need to articulate your Long-Term Care Plan.  Not everyone needs insurance, but everyone needs a plan.  Start the process by writing out a paragraph beginning with the following sentence: “If I became disabled [suffered a long-term health care incident], here’s how I would handle that financially…”

Step Two is to understand any coverage that you already have.  The online exercise includes a template with spaces to fill in for the primary features mentioned in this two-part blog series.  Once you have completed the template, you’ll better understand the coverage you have.  Step Three is to determine what you actually need and want in a policy and create a template to retrieve quotes and find the best coverage.  You’ll be better prepared for the engagement with the insurance agents because your template will ensure you’re comparing apples-to-apples, a very difficult thing to do with long-term disability income insurance and long-term care insurance.

Click HERE to access the long-term disability income app and HERE to access the long-term care app!

A Financial Emergency

by Jim Stovall

We have all heard and read a lot recently about the financial crisis or monetary emergency that we are facing.  These reports, most often, define the looming disaster in terms of billions or even trillions of dollars.  While we are certainly facing some difficult economic times around the world, the most critical financial emergency we are facing, individually and collectively, is represented by $1,000.

A recent survey showed the staggering reality that 64% of Americans don’t have $1,000 set aside as an emergency fund.  This is an alarming statistic because, with the cost of all the complex devices that make our world possible, a non-functioning refrigerator, broken transmission, or even a leaky roof can use up a $1,000 emergency fund and more.

It’s not a matter of if you’re going to have a $1,000 emergency.  It’s a matter of when.

These 64% of respondents to the survey were asked what they would do if they had an emergency since they don’t even have $1,000 set aside.

  • 9% of them said they would take out a loan;
  • 17% declared they would borrow from friends or family;
  • 9% replied they would get a cash advance on a credit card;
  • 17% replied they would simply disregard other monthly expenses to cover the cost of the emergency; and
  • 12% actually said they would have to sell or pawn some of their personal possessions.

In my latest book, The Ultimate Financial Plan, my co-author Tim Maurer and I explore every aspect of the financial decisions that are faced by you and your family; but it all starts with an emergency fund.

There is a tremendous benefit to having an emergency fund that goes far beyond covering the cost of an emergency.  It could commonly be defined as a good night’s sleep.  If you are one of the majority of Americans that don’t have even a minimal $1,000 emergency fund, you need to declare your own emergency now, and begin compiling reserve funds for that next inevitable bump in the road.  You can turn a broken air conditioner, a visit to the minor emergency medical center, or an unanticipated tax bill into an annoyance instead of living with these realities as a looming emergency.

The number one cause of divorce, depression, and dissatisfaction in our society is reported to be worry over money matters.  I’ve got to believe that the majority of the worry is not about retirement, college education, or paying off the house.  Most worries are about those routine, daily matters that come to us unexpectedly and can only be resolved with money.  Money is far from the most important thing in life; however, with respect to the problems that money solves, there is simply no substitute.

As you go through your day today, realize that relaxation and peace of mind may be only $1,000 away.

Today’s the day!